1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 24, 1996, is by
and among Eldorado Bancorp, a California corporation ("Eldorado"), and Commerce
Security Bancorp, Inc., a Delaware corporation ("CSBI").
WHEREAS, CSBI desires to acquire all of the capital stock of Eldorado
and its operating bank subsidiary, Eldorado Bank (the "Bank"), by means of a
merger of a direct or indirect subsidiary of CSBI ("Merger Sub") with and into
Eldorado on the terms and for the consideration provided herein;
WHEREAS, CSBI has conditioned its acquisition of Eldorado on Eldorado
making certain representations and warranties, and on Eldorado taking certain
actions and refraining from certain other actions prior to the closing of the
Merger, each as provided herein;
WHEREAS, the Board of Directors of Eldorado deems it desirable and in
the best interests of Eldorado's shareholders for Eldorado to be acquired by
CSBI for the consideration and on the other terms provided herein, including by
taking the actions required hereunder and by refraining from the other actions
prohibited hereunder;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and other agreements set forth herein,
and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
1.1 DEFINITIONS. Capitalized terms contained in this Agreement and not
defined in the preamble or the recitals above shall have the meanings set forth
in this Section 1.1:
"AGREEMENT" means this Agreement and Plan of Merger, including all
Disclosure Schedules and Exhibits hereto, as the same may be hereafter amended.
"BANK MERGERS" means the mergers and/or consolidations of the Bank,
Liberty National Bank and San Dieguito National Bank contemplated to occur
contemporaneously with or as soon as practicable following the Effective Time.
"BANK REGULATORS" means Federal or state Governmental Entities charged
with the supervision or regulation of banks or bank holding companies or engaged
in the insurance of bank deposits.
1
2
"BOARD OF DIRECTORS" means, except where another entity is expressly
referenced, the Board of Directors of Eldorado, as elected and qualified from
time to time.
"BORROWER GROUP OBLIGATIONS" means all loans from Eldorado and other
obligations to Eldorado of the applicable borrower, of all guarantors of such
borrower, and of all affiliates and associates of such borrower and guarantors;
provided, however, that Borrower Group Obligations do not include any portion of
an SBA Loan that has been sold without recourse to a third party.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday or
Friday that banks in Los Angeles, California are not required or permitted by
Law to be closed.
"CLASSIFIED ASSET" means (a) any loan or lease asset that is classified
on the books and records of Eldorado as "Substandard", "Doubtful" or "Loss" in
accordance with Loan rating standards applied generally by the FDIC or the
Federal Reserve Bank of San Francisco, and (b) any property classified on the
books and records of Eldorado as OREO.
"CLOSING" means the closing of the Merger, to be held on the Closing
Date at a location fixed pursuant to Section 8.1.
"CLOSING DATE" shall mean the date fixed pursuant to Section 8.1.
"COMMON STOCK" means the common stock of Eldorado, no par value.
"CORPORATIONS CODE" means the California Corporations Code, as amended
through the applicable date.
"CRITICIZED ASSET" means any Classified Asset and any other loan or
lease asset of Eldorado with a rating of "5", "6", "7" or "8" on the books and
records of Eldorado in accordance with Eldorado's loan rating policy,
consistently applied in accordance with the FDIC Rules and Guidelines as
described in the rules and regulations promulgated by the FDIC.
"CSBI" means Commerce Security Bancorp, Inc. and, unless the context
clearly indicates to the contrary, together with the following entities
considered on a consolidated basis (with respect only to the stated time
periods, where applicable): SDN; San Dieguito National Bank; Liberty National
Bank at all times from and after March 31, 1996; and Commerce Security Bank at
all times from and after September 1, 1996,
"CSBI'S KNOWLEDGE" means the actual knowledge of the following
executive officers of CSBI or its subsidiaries: Xxxxxx X. Xxxxxx, Xxxx X.
Xxxxxxxxxxxxx, Xxxxxx X. Xxxxxx and Xxxx X. Xxxxxx.
2
3
"CSBI SUBSIDIARY PREDECESSORS" means Liberty National Bank all times
through and including March 30, 1996, and Commerce Security Bank all times
through and including August 31, 1996.
"DEPOSIT" shall have the meaning set forth in Section 2.7.
"DEPOSIT ESCROW AGENT" shall mean First Trust of California, National
Association.
"DEPOSIT ESCROW AGREEMENT" means that certain Deposit Escrow Agreement,
dated as of even date herewith, by and among CSBI, Eldorado and the Deposit
Escrow Agent, which relates to the Deposit.
"DISCLOSURE SCHEDULES" means the several Schedules referenced in
Article III.
"DISCLOSURE SUPPLEMENT" shall have the meaning set forth in Section
5.5.
"DISSENTING SHARES" means all shares of Common Stock whose holders have
perfected dissenters' rights under Chapter 13 of the Corporations Code in the
manner provided therein.
"EFFECTIVE TIME" means the time as of which the Merger is deemed to
have become effective, as agreed upon by the Parties.
"ELDORADO" means Eldorado Bancorp and, unless the context clearly
indicates to the contrary, together with Eldorado Bank considered on a
consolidated basis; provided, however,that the inclusion in certain instances
(for increased clarity) of the parenthetical "(including the Bank)", or a phrase
of like import, following a reference to Eldorado shall not of itself imply that
the Bank is not to be included in any other reference to Eldorado.
"ELDORADO BANCORP" shall mean Eldorado Bancorp, a California
corporation.
"ELDORADO BENEFIT PLAN" means any employee benefit plan or arrangement
(including any "employee benefit plan" as defined in Section 3(3) of ERISA)
maintained or contributed to by Eldorado (including the Bank) or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), which together
with Eldorado would be deemed a "single employer" within the meaning of Section
4001 of ERISA.
"ELDORADO'S KNOWLEDGE" means the actual knowledge of the following
executive officers of Eldorado: X. X. Xxxxxxx, Xxxxxxx X. Xxxxxxxx, Xxxxx X.
Xxxxx, Xxxxxx Xxxxxx and Xxxxxxx X. Xxxxx.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
3
4
"ERISA AFFILIATE" shall have the meaning set forth in the definition of
Eldorado Benefit Plan.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGENT" means a banking institution or corporate trust company
reasonably satisfactory to Eldorado that CSBI shall appoint to act as exchange
agent hereunder.
"EXCLUDED OPTIONS" means Options with respect to which CSBI has entered
into separate cancellation agreements pursuant to the last sentence of Section
2.5,
"EXCLUDED SHARES" means shares of Common Stock owned as of the
Effective Time by Eldorado, CSBI or any direct or indirect subsidiary of CSBI,
in each case other than shares owned in a fiduciary capacity or as a result of
debts previously contracted.
"EXPENSES" means all out-of-pocket legal, accounting, consulting and
other fees and expenses reasonably incurred by the applicable Party (including,
in each case, those of the Party's subsidiaries) in connection with the Merger
and the Bank Mergers, including expenses incurred in connection with the
preparation of this Agreement and all negotiations, due diligence and other
activities conducted prior hereto, and including all broker's, finder's and
similar fees and expenses relating to the Merger, but excluding underwriting
fees or discounts, placement agent fees, and any amount payable pursuant to a
so-called standby subscription agreement.
"FDIC" means the Federal Deposit Insurance Corporation.
"GAAP" means Generally Accepted Accounting Principles as in effect in
the United States, consistently applied.
"GOVERNMENTAL ENTITY" means any administrative agency, commission,
court or other governmental authority or instrumentality, domestic or foreign,
including any government- sponsored corporation having regulatory authority
under law.
"HAZARDOUS MATERIAL" means any pollutant, contaminant, waste or
hazardous or toxic substance regulated by Law as such, and petroleum or
petroleum products.
"IMPARTIAL ARBITER" means a big-six accounting firm other than Price
Waterhouse LLP and KPMG Peat Marwick LLP (or any other firm then engaged as
external auditors by either Party), selected by CSBI with the reasonable
concurrence of Eldorado.
"INDEMNIFICATION AGREEMENTS" shall have the meaning given that term in
Section 5.11.2.
4
5
"INDEMNIFIED PERSON" shall have the meaning given that term in Section
5.11.2.
"IRS" means the United States Internal Revenue Service.
"LAW" means any statute, law, ordinance, rule, regulation or
administrative policy of any Governmental Entity that is applicable to the
referenced Person.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, a material
adverse effect on the business, properties, assets (including loan portfolios),
liabilities (whether absolute, contingent or otherwise), operations, liquidity,
income or condition (financial or otherwise) of such Person, considered as a
whole together with its subsidiaries and including such an effect caused
indirectly through any of its subsidiaries, or on the ability of such Person to
consummate the Merger on the terms hereof; provided, however, that a Material
Adverse Effect does not include a change with respect to, or effect on, such
Person resulting from a change in Law, GAAP, or RAP, or a change with respect
to, or effect on, such Person resulting from any other matter affecting
financial institutions or their holding companies generally.
"MERGER" means the merger of Merger Sub with and into Eldorado as more
particularly described in Section 2.1.
"MERGER CONSIDERATION" shall have the meaning given that term in
Section 2.3.1.
"MERGER SUB" means SDN or, in the discretion of CSBI, such other direct
or indirect subsidiary of CSBI as it may hereafter designate.
"MONTHLY FINANCIAL STATEMENTS" shall have the meaning given that term
in Section 5.7.
"MOST RECENT FINANCIAL STATEMENTS" means Eldorado's unaudited balance
sheet at the Most Recent Balance Sheet Date, and the related statements of
income and shareholders' equity for the nine month period ended at the Most
Recent Balance Sheet Date.
"MOST RECENT BALANCE SHEET DATE" means September 30, 1996.
"NON-CONTRACT EMPLOYEES" means employees of Eldorado who are not
parties to employment agreements with Eldorado, as listed on Schedule 3.17 or
Schedule 3.18.1.
"OPTION" means an option to purchase shares of Common Stock that has
been granted under any of the Eldorado Bancorp 1989 Stock Option Plan, the
Eldorado Bancorp 1992 Stock Option Plan, the Eldorado Bancorp 1995 Stock Option
Plan or the Eldorado Bancorp Amended and Restated Employee Stock Purchase Plan,
without regard to whether such option has yet
5
6
vested or otherwise become exercisable as of the applicable date but excluding
options that have expired or been exercised as of the applicable date.
"OPTIONHOLDER" means each Person who is the holder of an Option as of
immediately prior to the Effective Time.
"OPTION CANCELLATION PAYMENT" shall have the meaning given that term in
Section 2.5.
"OREO" means real property (i) acquired by Eldorado in the ordinary
course of its banking business through purchase at a foreclosure sale conducted
on a lien in favor of Eldorado (or a comparable sale by a trustee under a deed
of trust) or by acceptance of a deed in lieu of foreclosure or (ii) any asset of
Eldorado classified as "in-substance foreclosure" on the books and records of
Eldorado.
"PARTIES" means, collectively, Eldorado and CSBI.
"PERMITS" means permits, licenses, variances, exemptions, orders and
approvals of any applicable Governmental Entity.
"PERSON" means any natural person, corporation, limited liability
company, general or limited partnership, limited liability partnership, joint
venture, joint stock company, trust, unincorporated organization, association,
sole proprietorship, governmental body, or agency or political subdivision of
any government.
"PROXY STATEMENT" means the proxy statement by which Eldorado will
solicit proxies from the Shareholders for the approval of the Merger, including
any amendment or supplement thereto.
"QUALIFYING STRATEGIC TRANSACTION PROPOSAL" shall have the meaning
given that term in Section 5.1.3.
"RAP" means Regulatory Accounting Principles, as interpreted by the
FDIC.
"RECOMMENDATION OF APPROVAL" means an unqualified recommendation by the
Board of Directors to the Shareholders that such Shareholders approve the Merger
and the principal terms of this Merger Agreement; provided, however, that, in
the event that Xxxx Xxxxxxxxxx & Co. withdraws or adversely modifies the
fairness opinion described in Section 3.23 prior to the Shareholder Meeting, an
explanation in the Proxy Statement of the facts giving rise to such withdrawal
or modification shall not, of itself, cause the Board's recommendation to be
deemed "qualified."
6
7
"REDEMPTION" shall have the meaning given that term in Section 2.3.3.
"REGULATORY AGREEMENT" means any regulatory agreement, memorandum of
understanding or similar agreement with, any cease and desist or similar order
or directive entered or issued by, any commitment letter or similar undertaking
to, any extraordinary supervisory letter from, or any board of directors
resolutions adopted at the request of, any Bank Regulator.
"REPRESENTATIVES" means each of the applicable Person's directors,
officers, employees, agents, representatives and advisors.
"SBA LOANS" means loans guaranteed by the U.S. Small Business
Administration.
"SDN" means SDN Bancorp, Inc., a Delaware corporation and a
wholly-owned subsidiary of CSBI.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES FILINGS" mean all reports, schedules, registration
statements and definitive proxy statements required to be filed by Eldorado
pursuant to the Exchange Act with the SEC since January 1, 1994, as such
documents have been amended since the time of their filing.
"SHAREHOLDER MEETING" means a meeting of the Shareholders as described
in Section 5.2.1.
"SHAREHOLDERS" means the holders of the Common Stock as of the
applicable time.
"STRATEGIC TRANSACTION" means (a) at all times prior to and including
the time of any termination of this Agreement, (i) any purchase or other
acquisition of 20% or more of the assets, assumption of 20% or more of the
liabilities, or purchase or other acquisition of 20% or more of the equity (on a
pro forma basis) of Eldorado (including the Bank), (ii) any merger or other
business combination involving Eldorado or the Bank, (iii) any recapitalization
involving Eldorado or the Bank resulting in an extraordinary dividend or
distribution to Eldorado or the Shareholders, or (iv) any self-tender for or
redemption of 35% or more of the Common Stock, and (b) at all times following
any termination of this Agreement, (i) any purchase or other acquisition of 35%
or more of the assets, assumption of 35% or more of the liabilities, or purchase
or other acquisition of 35% or more of the equity (on a pro forma basis) of
Eldorado (including the Bank), (ii) any merger, recapitalization or other
transaction involving Eldorado
7
8
or the Bank as a result of which the then-existing Shareholders receive or
retain less than 65% of the equity securities of the resulting entity.
"STRATEGIC TRANSACTION PROPOSAL" means any proposal regarding a
Strategic Transaction.
"SURVIVING CORPORATION" means the corporation that is the survivor of
the Merger.
"TAX" means, except where the context clearly requires otherwise, all
Federal, state, local and foreign income, profits, franchise, gross receipts,
payroll, sales, employment, use, property, withholding, excise, occupancy and
other taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts.
"TERMINATION FEE" shall have the meaning given that term in Section
7.5.1.
"VIOLATION" means a conflict with, violation of, default under,
creation of a right of termination under, cancellation of, acceleration of any
obligation under, loss of a material benefit under, or creation of any lien,
pledge, security interest, charge or other encumbrance on assets under, the
referenced Law, organic document, agreement or other instrument, in each case
with or without notice or lapse of time, or both.
1.2 RULES OF CONSTRUCTION. The following rules of construction shall
apply to the interpretation of this Agreement:
1.2.1 All references to Sections and Articles shall, unless
another agreement is expressly referenced, mean the applicable sections or
articles of this Agreement. All references to Schedules shall mean the
applicable Disclosure Schedule.
1.2.2 The section titles and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of any provisions of this Agreement.
1.2.3 Whenever used in this Agreement, the word "including" shall
be non-exclusive and shall mean "including without limitation."
1.2.4 The terms "herein", "hereunder", and terms of similar
import refer to this Agreement as a whole and not to the specific Section or
Article in which they are used.
8
9
ARTICLE II
THE MERGER
2.1 THE MERGER. Eldorado and Merger Sub shall be the constituent
corporations to the Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, the Merger shall be effected by means of a
merger (hereinafter sometimes referred to as the "Merger") of Merger Sub with
and into Eldorado in accordance with Section 1108 of the Corporations Code and
Section 252 of the Delaware General Corporation Law, to be effected in
California by the filing of an Agreement of Merger substantially in the form
attached hereto as Exhibit 2.1 and to be effected in Delaware by the filing of
an appropriate Certificate of Merger. In accordance with each such statute, at
the Effective Time, the corporate existence of Merger Sub shall be merged into
Eldorado, and Eldorado shall be the Surviving Corporation and shall continue its
corporate existence under the laws of the State of California.
2.2 CORPORATE DOCUMENTS, DIRECTORS AND OFFICERS. From and after the
Effective Time and thereafter until amended as provided by law, the Articles of
Incorporation and By-laws of the Surviving Corporation shall be the Articles of
Incorporation and By-laws of Eldorado as in effect immediately prior to the
Effective Time. The directors and officers of the Surviving Corporation
initially shall be comprised of all of the directors and officers of Merger Sub
immediately prior to the Effective Time, and each such director or officer shall
serve until his or her successor has been duly elected or appointed and
qualified or until his or her earlier death, resignation or removal in
accordance with the terms of the Surviving Corporation's Articles of
Incorporation and By-laws.
2.3 TREATMENT OF COMMON STOCK AND MERGER SUB STOCK.
2.3.1 Conversion of Common Stock. At the Effective Time, each
share of Common Stock issued and outstanding immediately prior to the Effective
Time, excluding Dissenting Shares and Excluded Shares, shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive, in cash, the sum of $23.00 (the "Merger
Consideration"). All shares of Common Stock converted into the right to receive
the Merger Consideration pursuant to the preceding sentence shall, as of the
Effective Time, no longer be outstanding and shall automatically be cancelled
and shall cease to exist, and each certificate previously representing any such
shares shall thereafter represent only the right to receive the Merger
Consideration into which the shares of Common Stock represented by such
certificate have been converted. As of the Effective Time, all Excluded Shares
shall cease to exist and the certificates for such shares shall, as promptly as
practicable thereafter, be cancelled and no payments shall be made in
consideration therefor.
9
10
2.3.2 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Dissenting Shares shall not be converted into the
right to receive, or be exchangeable for, the Merger Consideration provided for
in Section 2.3.1 hereof, but, instead, the holders thereof shall be entitled to
payment for such Dissenting Shares in accordance with the provisions of Chapter
13 of the Corporations Code unless and until a holder of Dissenting Shares shall
have failed to perfect or shall have effectively withdrawn or lost such holder's
rights to appraisal and payment, as the case may be. Eldorado shall (a) give
CSBI prompt written notice of (x) the identities of all Shareholders who have
perfected rights to dissent pursuant to Corporations Code Chapter 13 and (y) the
receipt of any notice from a Shareholder demanding the purchase of his, her or
its shares, (b) not settle or offer to settle any such demands without the prior
written consent of CSBI, and (c) not, without the prior written consent of CSBI,
waive any vote in favor of the Merger or failure of a Shareholder timely to take
any other action required under Corporations Code Chapter 13.
2.3.3 Payment to Exchange Agent. Subject to the terms and
conditions hereof, and subject to reduction by (a) the amount of the Deposit and
(b) any amount funded by Eldorado in accordance with the immediately following
sentence, immediately prior to the Closing CSBI shall deliver or cause to be
delivered to the Exchange Agent, for the benefit of the Shareholders, such
amount of cash (in same day funds) as is sufficient to pay the aggregate Merger
Consideration that Shareholders are entitled to receive pursuant to Section
2.3.1. Subject to the terms and conditions hereof, immediately prior to the
Closing Eldorado shall pay to the Exchange Agent, for inclusion in the Merger
Consideration, such amount of cash (in same day funds) (the "Redemption"), if
any, as to which payment (x) CSBI has obtained all necessary approvals by Bank
Regulators and (y) CSBI's California counsel has reasonably determined, and has
so advised the Board of Directors, that such payment will not result in a
violation of Section ___ et seq. of the California Financial Code or any other
provision of law applicable to Eldorado or the Bank. The directors and officers
of Eldorado shall be entitled to rely on such determination by CSBI's counsel,
without separate investigation by such directors and/or officers, and CSBI shall
indemnify and hold harmless each director and officer of Eldorado against any
liability arising out of any payment of a Redemption by Eldorado to the full
extent provided under Section 5.11.2.
2.3.4 Conversion of Merger Sub Stock. At the Effective Time, the
shares of common stock of Merger Sub then issued and outstanding shall be
converted into a like number of shares of common stock of the Surviving
Corporation, which thereafter shall constitute all of the issued and outstanding
shares of common stock of the Surviving Corporation. From and after the
Effective Time, the authorized capital stock of the Surviving Corporation shall
consist of the authorized capital stock of Merger Sub.
10
11
2.4 EXCHANGE OF CERTIFICATES.
2.4.1 Common Stock Exchange Procedures. After the Effective Time,
each holder of a certificate or certificates theretofore representing shares of
issued and outstanding Common Stock (other than the Dissenting Shares and
Excluded Shares) shall, upon the surrender of such certificates to the Exchange
Agent, be entitled to receive in exchange therefor the amount of cash into which
Common Stock theretofore represented by the certificate or certificates so
surrendered shall have been converted as provided in Section 2.3.1, without
interest and subject to any required withholding of Taxes. The holder of a
certificate that prior to the Merger represented issued and outstanding shares
of Common Stock shall have no rights, after the Effective Time, with respect to
such shares except to surrender the certificate in exchange for cash without
interest thereon or, if applicable, to perfect such rights as a holder of
Dissenting Shares as such holder may have pursuant to the applicable provisions
of Chapter 13 of the Corporations Code. Within two (2) Business Days after the
Effective Time, the Surviving Corporation will send, or will cause the Exchange
Agent to send, to each holder of Common Stock at the Effective Time a letter of
transmittal for use in such exchange; provided, however, that, to the extent
permitted by law, CSBI agrees to make appropriate arrangements for the earlier
surrender of share certificates and payment in same-day funds immediately
following the Effective Time with respect to any Shareholder who will receive in
excess of $1,000,000 of Merger Consideration.
2.4.2 Certain Taxes. If any payment for shares of Common Stock is
to be made in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of such payment that
the certificate so surrendered shall be properly endorsed (or accompanied by an
appropriate instrument of transfer) and otherwise in proper form for transfer,
and that the person requesting such exchange shall pay to the Exchange Agent, in
advance, any transfer or other Taxes required by reason of the payment to a
person other than the registered holder of the certificate surrendered, or
required for any other reason, or shall establish to the satisfaction of the
Exchange Agent that such Tax has been paid or is not payable.
2.4.3 Lost, Stolen or Destroyed Certificates. In the event any
certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting
by such person of a bond in such amount as the Surviving Corporation may direct
as indemnity against any claim that may be made against it with respect to such
certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed certificate the cash deliverable in respect thereof pursuant to
Section 2.4.1.
2.4.4 Unclaimed Monies. Any portion of the cash paid to the
Exchange Agent by or on behalf of CSBI (together with any investment income
earned thereon) that remains
11
12
unclaimed by the Shareholders pursuant to the provisions of Section 2.4.1 six
months after the Closing Date shall be returned to CSBI, upon demand, and any
Shareholder who has not exchanged his, her or its shares of Common Stock for the
Merger Consideration in accordance with Section 2.4.1 prior to that time shall
thereafter look solely to CSBI for payment in respect of such shares.
Notwithstanding the foregoing, neither CSBI, the Surviving Corporation, the
Bank, the Exchange Agent nor any other Person shall be liable to any Shareholder
for any amount paid to a public official pursuant to applicable abandoned
property laws.
2.5 TREATMENT OF OPTIONS. Immediately prior to the Effective Time, each
holder of a then-outstanding Option shall be entitled (whether or not such
Option is then vested or exercisable) to receive, in cancellation of such
option, a cash payment (an "Option Cancellation Payment") in an amount equal to
the excess of the Merger Consideration over the per-share exercise price of such
Option, multiplied by the number of shares of Common Stock covered by such
Option, subject to any required withholding of Taxes. Nothing in this Section
2.5 shall be construed as preventing a holder from exercising his or her Option
prior to the Effective Time. Such Option Cancellation Payments shall be paid
contemporaneously with the Closing. Eldorado shall take appropriate steps to
obtain from each of the several Optionholders a cancellation agreement, in form
and substance acceptable to CSBI, cancelling each outstanding Option in
consideration of the applicable Option Cancellation Payment. Notwithstanding the
foregoing, CSBI may enter into agreements with one or more Optionholders, in the
sole discretion of CSBI and such Optionholder, providing for the cancellation of
some or all of such holder's Options for consideration consisting of options to
purchase CSBI common stock or for any other mutually agreeable consideration, in
each case in lieu of an Option Cancellation Payment, provided only that no such
agreement shall provide for a cash payment to the applicable Optionholder in
excess of the Option Cancellation Payment to which such Optionholder would
otherwise be entitled.
2.6 CLOSING OF TRANSFER BOOKS. At the Effective Time, the transfer books
for Common Stock shall be closed, and no transfer of shares of Common Stock
shall thereafter be made on such books. If, after the Effective Time,
certificates representing such shares are presented for transfer to the Exchange
Agent, they shall be cancelled and exchanged for the Merger Consideration as
provided in this Article II.
2.7 DEPOSIT BY CSBI. Concurrently herewith, (a) CSBI is delivering to
the Deposit Escrow Agent the sum of Four Million Five Hundred Thousand Dollars
($4,500,000) (together with all earnings thereon, the "Deposit"), and (b) CSBI,
Eldorado and the Deposit Escrow Agent are entering into the Deposit Escrow
Agreement. Upon the Closing, the Deposit shall be disbursed to the Exchange
Agent. The disposition of the Deposit upon any termination of this Agreement
shall be in accordance with Section 7.5.2. Each of CSBI and Eldorado shall
promptly take such steps as may be necessary to effect this Section, including,
without
12
13
limitation, issuing such written instructions and taking such other actions as
the Deposit Escrow Agent may request. Except to the extent provided to the
contrary in subsection 7.6.3(c) or in the Deposit Escrow Agreement, the
disposition of the Deposit pursuant to this Section 2.7 shall not prejudice any
rights or remedies that the Parties may otherwise have pursuant to this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ELDORADO
Except where a different date is expressly specified, and subject to
the exceptions stated herein (including those contained in any Disclosure
Schedule applicable to each given Section), Eldorado makes the representations
and warranties set forth below as of the date of this Agreement:
3.1 ORGANIZATION, STANDING AND POWER.
(a) Eldorado is a business corporation duly organized, validly
existing and in good standing under the laws of the State of California.
Eldorado has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business substantially as now being
conducted, and is duly qualified and in good standing to do business in each
jurisdiction in which a failure to be so qualified would have a Material Adverse
Effect on Eldorado. Copies of the Articles of Incorporation and By-Laws of
Eldorado, including all amendments thereto as of the date of this Agreement,
have been delivered to CSBI and are complete and correct. The minute books of
Eldorado accurately reflect in all material respects all corporate actions held
or taken by the Shareholders or the Board of Directors, including all committees
of such Board of Directors.
(b) The Bank is a commercial banking corporation duly
organized, validly existing and in good standing under the laws of the State of
California. The Bank is a wholly-owned subsidiary of Eldorado. The Bank
currently maintains, and at all times prior hereto has maintained, insurance of
its deposits under the Bank Insurance Fund (including, if formed prior to the
Closing Date, the Deposit Insurance Fund) of the FDIC, and all premiums and
assessments required in connection therewith have been paid by the Bank as the
same have become due. The Bank has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business
substantially as now being conducted and is duly qualified to do business in
each jurisdiction in which a failure to be so qualified would have a Material
Adverse Effect on it. The minute books of the Bank accurately reflect in all
material respects all corporate actions held or taken by the Bank's
shareholder(s) and Board of Directors, including all committees of such Board of
Directors.
13
14
3.2 CAPITAL STRUCTURE.
3.2.1 Capital Stock of Eldorado. The authorized capital stock of
Eldorado consists of 12,500,000 shares of Common Stock, no par value, and
5,000,000 shares of preferred stock, no par value. As of the date hereof,
3,787,734 shares of Common Stock are issued and outstanding, no shares of Common
Stock are held in treasury by Eldorado and no shares of Eldorado preferred stock
are either issued and outstanding or held in treasury by Eldorado. As of the
date hereof, the only shares of Common Stock reserved for future issuance are
314,233 shares of Common Stock reserved for issuance upon the exercise of
outstanding Options. No shares of Eldorado preferred stock are reserved for
future issuance. All outstanding shares of Common Stock have been validly issued
and are fully paid and nonassessable and are not subject to preemptive rights.
All of the issued and outstanding shares of Common Stock have been offered and
sold by Eldorado in compliance with applicable federal and state securities Laws
and issued in compliance with any preemptive right held by any Person. Except as
set forth on Schedule 3.2.1, as of the date hereof there are no dividends which
have accrued or been declared but are unpaid on the Common Stock. Eldorado has
no contractual obligation to register any shares of Common Stock under the
Securities Act.
3.2.2 Capital Structure of Bank. The authorized capital stock of
the Bank consists of 4,000,000 shares of common stock, $1.25 par value, of which
1,031,190 shares are issued and outstanding. All issued and outstanding shares
of the Bank's common stock are held, of record and beneficially, by Eldorado,
have been validly issued and are fully paid and non-assessable (except as
provided under the California Financial Code), and are held free and clear of
any liens, claims or other encumbrances. No shares of the Bank's common stock
are held in treasury by the Bank, and no shares are reserved for future
issuance.
3.2.3 Other Securities. Excepting as set forth on Schedule 3.2.3,
there are no options, warrants, calls, rights, commitments or agreements of any
character to which either Eldorado or the Bank is a party or by which Eldorado
or the Bank is bound obligating the applicable entity to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock or
other securities of Eldorado or the Bank or obligating Eldorado or the Bank to
grant, extend or enter into any such option, warrant, call, right, commitment or
agreement. The aggregate exercise price of all Options outstanding as of the
date hereof is $3,226,801.10. Schedule 3.2.3 hereto sets forth, with regard to
each Option outstanding as of the date hereof, the name of the holder, the
number of shares of Common Stock the holder is entitled to purchase, the
exercise price, the date of grant and the term of the Option. There are no
outstanding contractual obligations of either Eldorado or the Bank to
repurchase, redeem or otherwise acquire any shares of capital stock of Eldorado.
There are no bonds, debentures, notes or other instruments evidencing
indebtedness of either Eldorado or the Bank issued or
14
15
outstanding that entitle the holders thereof to vote on any matters on which
Shareholders may vote.
3.3 INTERESTS IN OTHER ENTITIES. Excepting only the Bank and as set
forth on Schedule 3.3, Eldorado does not hold more than 1% of the outstanding
equity securities of any corporation or other entity, and is not a member of any
partnership, joint venture or similar entity or collectivity, or a party to any
partnership agreement or joint venture agreement, however named. Eldorado does
not hold any "Acquisition, Development and Construction" ("ADC") loans, as that
term is used under GAAP.
3.4 AUTHORITY AND RELATED MATTERS. Subject only to the approvals of the
Shareholders as specified in the immediately following sentence, Eldorado (a)
has all requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated hereby (including the Merger), and
(b) has duly authorized the execution and delivery of this Agreement and the
consummation of such transactions (including the Merger) by all necessary
corporate action on the part of Eldorado. The only vote of the holders of any
class or series of Eldorado's securities necessary to approve this Agreement or
the consummation of the Merger is the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock entitled to vote thereon
approving the Merger. No other corporate proceedings on the part of Eldorado not
heretofore taken are necessary to approve this Agreement or to consummate the
Merger. This Agreement has been duly executed and delivered by Eldorado and
(assuming due authorization, execution and delivery by CSBI) constitutes the
valid and binding obligation of Eldorado, enforceable in accordance with its
terms, subject only to Laws regarding bankruptcy, insolvency, reorganization
moratorium or otherwise affecting creditors' rights generally, and to the
application of general principles of equity (whether considered in a proceeding
at law or in equity).
3.5 CONFLICTS. Except as described on Schedule 3.5, the execution and
delivery of this Agreement does not, and the consummation of the Merger will
not, result in any Violation of any provision of the Articles of Incorporation
or By-laws of Eldorado, and subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and filings
included among Eldorado's Governmental Approvals, the execution and delivery of
this Agreement does not, and the consummation of the Merger will not, result in
any Violation of any Law, any loan or credit agreement, note, mortgage,
indenture, lease, employee benefit plan or other agreement, obligation,
instrument, permit, concession, franchise or license, or any judgment, order or
decree, applicable to Eldorado or its properties or assets which latter
Violation, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect on Eldorado.
15
16
3.6 CONSENTS. Except as disclosed on Schedule 3.6 (collectively, the
"Eldorado Governmental Approvals"), no consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required in connection with Eldorado's execution and delivery of this Agreement
or its consummation of the Merger, as to which the failure to obtain the same
would have a Material Adverse Effect on Eldorado or materially interfere with
Eldorado's ability to consummate the Merger.
3.7 SECURITIES FILINGS AND FINANCIAL STATEMENTS.
3.7.1 Eldorado has filed all Securities Filings required to be
filed by it with the SEC since January 1, 1994. As of their respective dates,
the Securities Filings filed by Eldorado complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC applicable to such Securities Filings,
and none of the Securities Filings contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.7.2 The consolidated financial statements of Eldorado included
in the Securities Filings comply as to form in all material respects with
applicable accounting requirements and with the rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP (except as may
be indicated in the notes thereto or, in the case of the unaudited statements,
as permitted by Form 10-Q), are complete and correct in all material respects
and present fairly, in all material respects, the financial position of Eldorado
(consolidated with any subsidiaries then in existence) as of the dates thereof
and the results of its (their) operations and cash flows for the periods then
ended. All material agreements, contracts and other documents required to be
filed as exhibits to any of the Securities Filings have been so filed. The books
and records of Eldorado have been, and are being, maintained in all material
respects in accordance with GAAP and reflect only actual transactions.
3.8 REGULATORY FILINGS AND AGREEMENTS. Eldorado has timely filed all
material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that it was required to file since
December 31, 1993 with any Bank Regulator, and all other material reports and
statements required to be filed by it since December 31, 1993, including any
report or statement required to be filed pursuant to the Laws of the United
States (including those of the Board of Governors of the Federal Reserve and the
FDIC) or the State of California, and has paid all fees and assessments due and
payable in connection therewith. Except for normal examinations conducted by a
Bank Regulator in the regular course of Eldorado's business or as disclosed on
Schedule 3.8, no Bank Regulator has initiated any proceeding or investigation
into the business or operations of Eldorado since December 31, 1993 or, to
Eldorado's Knowledge, is currently contemplating the initiation of any
proceeding or
16
17
investigation. Except as disclosed on Schedule 3.8, Eldorado is not a party to
or subject to any Regulatory Agreement with or from any Bank Regulator that
restricts the conduct of Eldorado's business or in any manner relates to its
capital adequacy, credit policies, loan origination practices or management nor
has Eldorado been notified that any Bank Regulator is contemplating issuing or
requesting (or considering the appropriateness of issuing or requesting) any
such Regulatory Agreement. Except as disclosed on Schedule 3.8, there exists no
material unresolved violation, criticism or exception identified by any Bank
Regulator with respect to any report or statement of Eldorado, or relating to
any examination of Eldorado.
3.9 UNDISCLOSED LIABILITIES. Except (a) as and to the extent reflected
in the Most Recent Financial Statements, (b) as and to the extent reflected on
Schedule 3.9, (c) obligations (including guarantees and letters of credit) not
required by GAAP to be reflected, reserved against or disclosed in the Most
Recent Financial Statements, all of which obligations are set forth on Schedule
3.9 and none of which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, and (d) obligations incurred in the
ordinary course of business consistent with past practice since the Most Recent
Balance Sheet Date, Eldorado does not have any liabilities, commitments or
obligations of any nature, whether absolute, accrued, contingent or otherwise,
and whether due or to become due, which relate to transactions entered into, or
any state of facts existing, on or before the date hereof and which would be
required under GAAP to be shown on an audited balance sheet as of the date
hereof or referenced in notes thereto if such balance sheet or notes existed.
3.10 CRITICIZED ASSETS, RESERVES AND CERTAIN OTHER ASSETS. As of the
date specified on Part A of Schedule 3.10 (which date is not earlier than three
(3) Business Days prior to the date hereof), and excepting assets with respect
to which the aggregate Borrower Group Obligations are less than $100,000, the
only assets of Eldorado that were (a) Criticized Assets, or (b) over 90 days
delinquent in payment of principal or interest or, to Eldorado's Knowledge,
materially in default of any other material provision of the operative
documents, whether or not the same are Criticized Assets, are those listed on
Part A of Schedule 3.10 hereto (which schedule identifies the loan, the current
book balance, the amount of loan loss reserve, if any, specifically allocated
thereto, and the loan classification). The loan and other asset classification
procedures utilized by Eldorado are in accordance with RAP and prudent banking
practice, and are consistently applied. As of the Most Recent Balance Sheet
Date, Eldorado's specific allowance for loan losses with regard to Classified
Assets was $4,839,000. Part B or Schedule 3.10 hereto sets forth all loans of
Eldorado (whether or not they are Classified Assets or are otherwise in default)
to any director, executive officer or ten percent shareholder of Eldorado, or to
Eldorado's Knowledge, any corporation or enterprise controlling, controlled by
or under common control with any of the foregoing.
17
18
3.11 INVESTMENT SECURITIES; DERIVATIVES. Part A of Schedule 3.11
describes all of the investment securities, mortgage backed securities and
securities held for sale of Eldorado as of the date hereof, including (to the
extent applicable to that type of security) descriptions of such securities,
CUSIP numbers, pool face values, coupon rates, book values and market values
(approximated by Eldorado management in the case of illiquid securities) and, in
each case as of November 30, 1996 (or as of the date of acquisition, if later
acquired). Except as disclosed on Part B of Schedule 3.11, since December 31,
1994, Eldorado has not engaged in any transaction in or involving forwards,
futures, options on futures, swaps or other derivative instruments except as
agent on the order and for the account of others. To Eldorado's Knowledge, none
of the counterparties to any contract or agreement with respect to any such
instrument is in default with respect to such contract or agreement and no such
contract or agreement, were it to be a loan held by Eldorado, would be a
Criticized Asset. The financial position of Eldorado under or with respect to
each instrument set forth on Part B of Schedule 3.11 has been reflected on the
books and records of Eldorado in accordance with GAAP, and no open exposure of
Eldorado with respect to any such instrument (or with respect to multiple
instruments with respect to any single counterparty) exceeds $100,000.
3.12 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed on
Schedule 3.12, since September 30, 1996, (a) no event or development has
occurred that, individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect on Eldorado, and (b) Eldorado has
carried on its business in the ordinary and usual course consistent with its
past practices. Except (x) as disclosed on Schedule 3.12, (y) increases required
by applicable Law or by an employment contract disclosed on Schedule 3.17 or
Schedule 3.18.1, or (z) normal increases with respect to Non-Contract Employees
in the ordinary course of business consistent with past practice, since
September 30, 1996 Eldorado has not increased the wages, salary, compensation,
pension, or other benefits or perquisites payable to any officer, employee or
director, granted any severance or termination pay, entered into any contract to
make or grant any severance or termination pay, or paid any bonus.
3.13 COMPLIANCE WITH APPLICABLE LAWS. Except as disclosed in the
Securities Filings, the business of Eldorado is, and at all times since December
31, 1992 has been, conducted in compliance with all Laws (including those
relating to equal credit, fair lending, fair housing and community
reinvestment), except where a failure to so comply, individually or in the
aggregate, would not have a Material Adverse Effect on Eldorado. Eldorado holds
all Permits that are material to the operation of its business, and is in
compliance with the terms of each such Permit except where the failure so to
comply, individually or in the aggregate, would not have a Material Adverse
Effect on Eldorado. Except as disclosed on Schedule 3.8 or Schedule 3.13, no
investigation by any Governmental Entity with respect to Eldorado is pending or,
to Eldorado's Knowledge, contemplated.
18
19
3.14 LITIGATION AND OTHER DISPUTES. Except as disclosed on Schedule
3.14, as of the date hereof there is no suit, action, or proceeding pending or,
to Eldorado's Knowledge, threatened, against or affecting Eldorado or any of its
assets, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Eldorado the obligations
under which have not heretofore been fully performed. Neither (a) any matter
disclosed on Schedule 3.14, nor (b) any suit, action or proceeding pending or
threatened as of the Closing Date, nor (c) any judgment, decree, injunction,
rule or order of any Governmental Entity outstanding against Eldorado as of the
Closing Date (and not fully performed prior to the date hereof) has had or could
reasonably be expected, if adversely determined, to have a Material Adverse
Effect on Eldorado. Except as disclosed on Schedule 3.14, since December 31,
1993, Eldorado has not been a defendant, either directly or as
defendant-in-counterclaim or cross-claim, in any material litigation in which
any "lender liability" cause of action was asserted against Eldorado.
3.15 ADMINISTRATION OF FIDUCIARY ACCOUNTS. Eldorado has properly
administered in all material respects all accounts for which it acts as a
fiduciary, including but not limited to accounts for which it serves as a
trustee, agent, custodian, personal representative, guardian, conservator or
investment advisor, in accordance with the terms of the governing documents and
applicable state and federal law and regulation and common law. Neither Eldorado
nor any of its directors, officers or employees has committed any breach of
trust with respect to any such fiduciary account which, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect on Eldorado, and the accountings for each such fiduciary account are true
and correct in all material respects and accurately reflect the assets of such
fiduciary account.
3.16 TAXES. Eldorado has filed all tax returns it has been required to
file and Eldorado has paid or has set up an adequate reserve for the payment of
all Taxes required to be paid as shown on such returns, and the Most Recent
Financial Statements reflect an adequate reserve for all Taxes payable by
Eldorado accrued through the date of such financial statements. Except as set
forth on Schedule 3.16, no deficiencies for any Taxes have been proposed,
asserted or assessed against Eldorado that are not adequately reserved for. The
Federal income tax returns of Eldorado have been examined by and settled with
the IRS, or the statute of limitations with respect to each such year has
expired (and no waiver extending the statute of limitations has been requested
or granted), for all years through 1992. No audit or review is pending for any
of such years or for any subsequent year and, except as set forth on Schedule
3.16, to Eldorado's Knowledge no challenge or deficiency is contemplated by the
IRS with regard to any year. Except as set forth on Schedule 3.16, Eldorado has
not [(a) filed any consent to the application of Section 341(f) of the Internal
Revenue Code, (b) filed any election under Section 338(g) or 338(h)(10) of the
Internal Revenue Code or caused or permitted any deemed election under Section
338(e) of the Internal Revenue Code,] (c) applied for any revenue ruling,
private letter
19
20
ruling or other ruling relating to Taxes, (d) entered into any closing agreement
with any Governmental Entity relating to Taxes, or (e) been, at any time, a
member of any affiliated group filing any consolidated tax return other than the
existing group consisting of Eldorado and the Bank.
3.17 CERTAIN AGREEMENTS. Except as disclosed on Schedule 3.17, Eldorado
is not party to (nor are any of its assets bound by) any material oral or
written contract, lease or other agreement in effect as of the date hereof (a)
that would be required to be filed as an exhibit to an annual report on Form
10-K filed with the SEC, (b) the benefits of which (to either party) will accrue
or be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of the Merger or the Bank Mergers (either alone or upon the
occurrence of any additional acts or events) or the value of any of the benefits
of which will be calculated on the basis of the Merger or the Bank Mergers or
any portion or aspect of either (including any so-called retention or similar
bonuses), (c) relating to employment, salary continuation, severance, consulting
(including data processing, software programming and licensing contracts),
collective bargaining or otherwise relating to the provision of personal
services or payment therefor, (d) which, upon the consummation of the Merger or
the Bank Mergers, will result in any payment (whether of severance pay or
otherwise) becoming due from Surviving Corporation or the Bank to any officer or
employee of the Surviving Corporation or the Bank or formerly of Eldorado, (e)
relating to non-competition or secrecy, (f) that materially restricts the
conduct of any line of business by Eldorado, or (g) that was entered into in
connection with the consummation of a federally assisted acquisition of a
depository institution pursuant to which Eldorado is entitled to receive
financial assistance or indemnification from any Governmental Entity. Eldorado
in not in Violation of any contract, lease or other agreement described by any
of the foregoing clauses (a) through (g) in an manner that (i) could reasonably
be expected to result in a termination of such agreement or a claim for material
damages by the other party thereto or (ii) could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect on
Eldorado, and to Eldorado's Knowledge, no other party to any such contract,
lease or other agreement has committed any such Violation of the same. Except
for agreements filed as part of the Securities Filings, Eldorado has previously
delivered to CSBI true and correct copies of each agreement described by any of
the foregoing clauses (a) through (g) that is in writing and true and correct
summaries of each such agreement that is not in writing. Except as disclosed on
Schedule 3.17, Eldorado is not a party to, and since December 31, 1993 has not
been a party to (nor are any of its assets bound by), any oral or written
contract, lease or other agreement of any name or nature with a Person who was,
as of or within one year prior to the date of such agreement, a director,
officer or holder of 3% or more of the Common Stock.
20
21
3.18 EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
3.18.1 Except as disclosed on Schedule 3.18.1, no employee or
director of Eldorado or consultant retained by Eldorado (in each case including
the Bank) shall have the right to receive from the Surviving Corporation or the
Bank any material payment (including bonuses and including those in the nature
of severance, salary continuation, unemployment compensation, golden parachute
or otherwise) (a) as a consequence of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, or (b) in
the event his or her employment or service is terminated by the Surviving
Corporation or the Bank at or after the Effective Time, whether such right
arises as a matter of contract, past policy or understanding, pursuant to an
Eldorado Benefit Plan or otherwise. Except as disclosed on Schedule 3.18.1,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (x) materially increase any benefits
otherwise payable under any Eldorado Benefit Plan or (y) result in any
acceleration of the time of payment or vesting of any such benefits to any
material extent.
3.18.2 Schedule 3.18.2 sets forth a true and complete list of each
Eldorado Benefit Plan maintained as of the date hereof. Eldorado has heretofore
delivered to CSBI true and complete copies of each Eldorado Benefit Plan and all
related documents, including but not limited to (a) the actuarial report for
such Benefit Plan (if applicable) for each of the last two years, and (b) the
most recent determination letter from the Internal Revenue Service (if
applicable) for such Eldorado Benefit Plan. Except as disclosed on Schedule
3.18.2, (i) each of the Eldorado Benefit Plans has been operated and
administered in all material respects with applicable laws, including but not
limited to ERISA and the Internal Revenue Code, (ii) each Eldorado Benefit Plan
intended to be "qualified" within the meaning of Section 401 (a) of the Internal
Revenue Code is so qualified, (iii) no Eldorado Benefit Plan provides benefits,
including without limitation death or medical benefits (whether or not insured),
with respect to current or former employees of Eldorado or any ERISA Affiliate
beyond their retirement or other termination of service, other than (w) coverage
mandated by applicable law, (x) death benefits or retirement benefits under any
"employee pension Benefit Plan," as that term is defined in Section 3(2) of
ERISA, (y) deferred compensation benefits accrued as liabilities on the books of
Eldorado or (z) benefits the full cost of which is borne by the current or
former employee (or his or her beneficiary), (iv) no liability under Title IV of
ERISA has been incurred by Eldorado or any ERISA Affiliate that has not been
satisfied in full and no condition exists that presents a material risk to
Eldorado or any ERISA Affiliate of incurring a material liability thereunder,
(v) no Eldorado Benefit Plan is a "multiemployer pension Benefit Plan," as such
term is defined in Section 3(37) of ERISA, (vi) all material contributions or
other material amounts payable by Eldorado as of the Effective Time with respect
to each Eldorado Benefit Plan in respect of current or prior plan years have
been paid or accrued in accordance with GAAP and Section 412 of the Internal
Revenue Code, (vii) neither Eldorado nor any ERISA Affiliate has engaged in
21
22
a transaction in connection with which Eldorado or any ERISA Affiliate could be
subject to either a material civil penalty assessed pursuant to Section 409 or
502(i) of ERISA or a material Tax imposed pursuant to Section 4975 or 4976 of
the Internal Revenue Code, and (viii) to Eldorado's Knowledge, there are no
pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any Eldorado Benefit Plan or any trusts
related thereto.
3.18.3 There are no material disputes or employee grievances
pending or, to Eldorado's Knowledge, contemplated by or between any of
Eldorado's employees and Eldorado, and there are not a significant number of
disciplinary actions pending or contemplated with respect to Eldorado's
employees. Eldorado has complied in all respects with all Laws relating to the
employment of labor and, except as disclosed on Schedule 3.18.3, has no
liability for any arrears of wages or employment-related taxes, or penalties for
failure to comply with any such Law, or for any severance or termination
payments of any type. No election or proceeding relating to Eldorado's labor
relations is pending or, to Eldorado's Knowledge, contemplated. Eldorado has had
no union activity or any material labor trouble (including any strike, work
stoppage, slow-down, or similar disturbance) of any kind, nature or description
at any time. True and correct copies of all personnel policies and manuals of
Eldorado have been provided to CSBI.
3.19 PROPERTIES. Except as disclosed on Part A of Schedule 3.19,
Eldorado does not hold title to or a beneficial interest in any real property
other than OREO. The only real properties leased or otherwise occupied by or in
the possession of Eldorado (excluding OREO and property occupied only as lender
in possession, in each case provided that Eldorado is conducting no business in
such property, and excluding the owned properties disclosed on Part A of
Schedule 3.19), are those properties identified on Part B of Schedule 3.19.
Eldorado has good and valid title to all of the tangible personal property and
assets which are used in the operation of its business and which it owns or
purports to own, and has good and valid title to all of the leasehold interests
in all leases of real or personal property which it leases or purports to lease,
including all personal property, leasehold interests and other assets reflected
as owned or leased, as applicable, by Eldorado in the Most Recent Financial
Statements (except in each case for assets disposed of since the Most Recent
Balance Sheet Date in the ordinary course of business consistent with past
practice), in each case free and clear of any liens, encumbrances or other
imperfections of title other than such liens, encumbrances or imperfections as
(a) are reflected, reserved against or otherwise disclosed in the Most Recent
Financial Statements, (b) arise out of Taxes not yet due or payable, or (c)
relate to immaterial properties or assets or otherwise could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Eldorado enjoys peaceful and undisturbed possession of the applicable leased
asset under all leases of real or personal property under which it is operating
or to which it is a party. All of such leases are valid, subsisting and in full
force and effect and there are no
22
23
existing defaults or events which, with the passage of time or the giving of
notice, or both, would constitute defaults by Eldorado or, to Eldorado's
knowledge, by any other party thereto, except for such defaults, if any, which
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. All items of real or personal property owned or used by
Eldorado and material to its business have been properly maintained and, to
Eldorado's Knowledge, are in good operating order and repair.
3.20 ENVIRONMENTAL. Except as disclosed on Schedule 3.20, Eldorado and
all real property (including OREO) in the possession of Eldorado are, and at all
times while in the possession of Eldorado each such property has been, in
compliance with all applicable Laws relating to pollution or protection of human
health or the environment (including Laws relating to emissions, discharges,
releases or threatened releases of Hazardous Material or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Material), except for Violations that, either
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect on Eldorado. To Eldorado's Knowledge,
there has not occurred any release of Hazardous Material on, under or affecting
any real property during the period of Eldorado's ownership, possession or
operation of such property (including its participation in the management of any
business located on such property) or, to Eldorado's Knowledge, during any prior
period. Neither Eldorado nor any property now or heretofore in its possession is
or, while owned or in the possession of Eldorado, has ever been a defendant in
or the subject of any suit, claim, action, proceeding, investigation or written
notice or, to Eldorado's Knowledge, oral inquiry before or by any Governmental
Entity or other forum relating to an alleged material Violation (including by
any predecessor) of any environmental Law or relating to the release or
threatened release into the environment of any Hazardous Material, whether or
not occurring at or on a site owned, leased or operated by Eldorado.
3.21 INTELLECTUAL PROPERTY. Eldorado either owns or possesses valid and
binding licenses and other rights to use all material trademarks, trade names,
servicemarks, copyrights, trade secrets and patents used in its businesses. The
only such licenses or other rights to use intellectual property that require
payment by Eldorado are licenses for the use of software and similar property
entered into by Eldorado in the ordinary course of business. Eldorado has not
received any written challenge to its ownership of, or other right to use, any
such intellectual property by any Person or any notice of alleged conflict
between the same and the rights of any other Person. Eldorado has, in all
material respects, performed all of its obligations under, and is not in
material Violation of, any contract, agreement, arrangement or commitment
relating to any of the foregoing.
23
24
3.22 BROKERS. Eldorado has not employed any broker, finder or similar
Person in connection with the Merger other than Xxxx Xxxxxxxxxx & Co., and has
not incurred and will not incur any broker's, finder's or similar fees,
commissions or expenses in connection with the Merger excepting those of Xxxx
Xxxxxxxxxx & Co., with such fee to be paid at the Closing.
3.23 FAIRNESS OPINION. Eldorado has received an opinion from Xxxx
Xxxxxxxxxx & Co., addressed to the Board of Directors, to the effect that as of
the date hereof the Merger Consideration is fair, from a financial point of
view, to the holders of the Common Stock.
3.24 DISCLOSURE OF ALL MATERIAL MATTERS. Except as disclosed in the
Disclosure Schedules or in a Disclosure Supplement (when delivered), none of (a)
the representations and warranties made by Eldorado in this Agreement (as
qualified by all information in the Disclosure Schedules, Disclosure Supplements
and Exhibits hereto taken as a whole), (b) any of Eldorado's Forms 10-K and 10-Q
filed with the SEC between the date hereof and the Closing Date (when the same
are filed), (c) the Bank's Reports of Condition and Reports of Income filed with
the FDIC between the date hereof and the Closing Date (when the same are filed),
or (d) the Monthly Financial Statements (when the same are delivered), including
in each case the financial statements included therein and other exhibits
thereto, contains (or when filed or delivered, will contain) any untrue
statement of a material fact or omits (or when filed or delivered, will omit) to
state any material fact necessary in order to make the statements made or
information disclosed, in the light of the circumstances under which they were
made or disclosed, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CSBI
Except where a different date is expressly specified, and subject to
the exceptions stated herein (including those contained in any Schedule
applicable to each given Section), CSBI makes the representations and warranties
set forth below as of the date of this Agreement:
4.1 ORGANIZATION, STANDING AND POWER. CSBI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
4.2 CAPITAL STRUCTURE.
4.2.1 Capital Stock of CSBI. The authorized capital stock of CSBI
consists of 12,000,000 shares of common stock, par value $.01 per share, and
1,000,000 shares of preferred stock, par value $.01 per share. As of the date
hereof, 9,759,098 shares of Common Stock are issued and outstanding, no shares
of CSBI common stock are held in treasury by CSBI
24
25
and no shares of CSBI preferred stock are either issued and outstanding or held
in treasury by CSBI. As of the date hereof, no shares of CSBI common stock or
CSBI preferred stock are reserved for future issuance. All outstanding shares of
CSBI common stock have been validly issued and are fully paid and nonassessable
and are not subject to preemptive rights. All of the issued and outstanding
shares of Common Stock have been offered and sold by CSBI in compliance with
applicable federal and state securities Laws and issued in compliance with any
preemptive right held by any Person. As of the date hereof there are no
dividends which have accrued or been declared but are unpaid on the CSBI common
stock.
4.2.2 Ownership of Operating Banks. All issued and outstanding
shares of the common stock of Commerce Security Bank are held, of record and
beneficially, by CSBI, have been validly issued and are fully paid and
non-assessable (except as provided under the California Financial Code), and are
held free and clear of any liens, claims or other encumbrances. All issued and
outstanding shares of the common stock of Liberty National Bank and San Dieguito
National Bank are held, of record and beneficially, by SDN, have been validly
issued and are fully paid and non-assessable (except as provided under the
National Bank Act), and are held free and clear of any liens, claims or other
encumbrances. All issued and outstanding shares of the common stock of SDN are
held, of record and beneficially, by CSBI, have been validly issued and are
fully paid and non-assessable, and are held free and clear of any liens, claims
or other encumbrances.
4.3 AUTHORITY AND RELATED MATTERS. CSBI has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the Merger have been duly authorized by all necessary action on
the part of CSBI, including approval by its board of directors. This Agreement
has been duly executed and delivered by CSBI and (assuming due authorization,
execution and delivery by Eldorado) constitutes the valid and binding obligation
of CSBI, enforceable against CSBI in accordance with its terms subject only to
Laws regarding bankruptcy, insolvency, reorganization moratorium or otherwise
affecting creditors' rights generally, and to the application of general
principles of equity (whether considered in a proceeding at law or in equity).
4.4 NO CONFLICTS. Neither the execution and delivery of this Agreement
nor the consummation of the Merger will conflict with or result in any Violation
of any provision of the Certificate of Incorporation or By-laws of CSBI. Subject
to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in Section 4.5, neither the
execution and delivery of this Agreement nor the consummation of the Merger will
result in any Violation of any Law, any loan or credit agreement, note,
mortgage, indenture, lease, employee benefit plan or other agreement,
obligation, instrument, permit, concession, franchise or license, or any
judgment, order or decree, applicable to CSBI or its
25
26
properties or assets, which Violation could reasonably be expected to have a
Material Adverse Effect on CSBI.
4.5 CONSENTS. Except as disclosed on Schedule 4.5 (collectively, the
"CSBI Governmental Approvals"), no consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity is required
in connection with the execution and delivery of this Agreement by CSBI, or the
consummation of the Merger by Merger Sub, as to which the failure to obtain the
same would have a Material Adverse Effect on CSBI or materially interfere with
Merger Sub's ability to consummate the Merger or CSBI's ability to cause Merger
Sub to consummate the Merger.
4.6 SECURITIES FILINGS, FINANCIAL STATEMENTS AND FINANCIAL CONDITION.
The consolidated financial statements of CSBI included in CSBI's Form 10-Q filed
with the SEC for the period ended September 30, 1996 comply as to form in all
material respects with applicable accounting requirements and with the rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP (except as may be indicated in the notes thereto or as permitted by
Form 10-Q), are complete and correct in all material respects and present
fairly, in all material respects, the financial position of CSBI (consolidated
with all subsidiaries then in existence) as of the date thereof and the results
of its (their) operations and cash flows for the period then ended. The books
and records of CSBI have been, and are being, maintained in all material
respects in accordance with GAAP and reflect only actual transactions. Each of
CSBI, Commerce Security Bank, Liberty National Bank and San Dieguito National
Bank is "well capitalized" (as that term is defined by the applicable entity's
primary federal Bank Regulator) and, on a pro forma basis giving effect to the
Merger Financing, will be well capitalized as of the Closing.
4.7 REGULATORY FILINGS AND AGREEMENTS. Except as disclosed on Schedule
4.7, CSBI and, to CSBI's Knowledge, each CSBI Subsidiary Predecessor, has timely
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that the applicable entity
was required to file since December 31, 1993 with any Bank Regulator, and all
other material reports and statements required to be filed by it since December
31, 1993, including any report or statement required to be filed pursuant to the
laws, of the United States (including those of the Board of Governors of the
Federal Reserve and the Office of the Comptroller of the Currency) or the State
of California, and has paid all fees and assessments due and payable in
connection therewith. Except for normal examinations conducted by a Bank
Regulator in the regular course of CSBI's the applicable CSBI Subsidiary
Predecessor's business or as disclosed on Schedule 4.7, no Bank Regulator has
initiated any proceeding or investigation into the business or operations of
CSBI or, to CSBI's Knowledge, any CSBI Subsidiary Predecessor, since December
31, 1993 or, to CSBI's Knowledge, is currently contemplating the initiation of
any proceeding or investigation. Except as disclosed
26
27
on Schedule 4.7, CSBI is not a party to or subject to any Regulatory Agreement
with or from any Bank Regulator that restricts the conduct of CSBI's business or
in any manner relates to its capital adequacy, credit policies, loan origination
practices or management nor has CSBI been notified that any Bank Regulator is
contemplating issuing or requesting (or considering the appropriateness of
issuing or requesting) any such Regulatory Agreement. Except as disclosed on
Schedule 4.7, there exists no material unresolved violation, criticism or
exception identified by any Bank Regulator with respect to any report or
statement of CSBI, or relating to any examination of CSBI.
4.8 ABSENCE OF UNDISCLOSED LIABILITIES, CERTAIN CHANGES OR EVENTS.
Except (a) as and to the extent reflected in CSBI's Form 10-Q filed with the SEC
for the period ended September 30, 1996, (b) obligations (including guarantees
and letters of credit) not required by GAAP to be reflected, reserved against or
disclosed in such Form 00-X, xxxx of which obligations, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
CSBI, and (c) obligations incurred in the ordinary course of business consistent
with past practice since the Most Recent Balance Sheet Date, CSBI does not have
any liabilities, commitments or obligations of any nature, whether absolute,
accrued, contingent or otherwise, and whether due or to become due, which relate
to transactions entered into, or any state of facts existing, on or before the
date hereof and which would be required under GAAP to be shown on an audited
balance sheet as of the date hereof or referenced in notes thereto if such
balance sheet or notes existed. Since the Most Recent Balance Sheet Date, no
event or development has occurred that, individually or in the aggregate, has
had or could reasonably be expected to have a Material Adverse Effect on CSBI,
and CSBI has carried on its business in the ordinary and usual course consistent
with its past practices.
4.9 COMPLIANCE WITH APPLICABLE LAWS. Except as disclosed in any report,
schedule, registration statement or definitive proxy statement filed with the
SEC or the Office of the Comptroller of the Currency (as applicable) pursuant to
the Exchange Act since January 1, 1994 by CSBI or, to CSBI's knowledge, any CSBI
Subsidiary Predecessor (as such documents have been amended since the time of
their filing), the business of CSBI is, and at all times since December 31, 1992
the business of CSBI and, to CSBI's knowledge, the business of each CSBI
Subsidiary Predecessor, has been conducted in compliance with all Laws
(including those relating to equal credit, fair lending, fair housing and
community reinvestment), except where a failure to so comply, individually or in
the aggregate, would not have a Material Adverse Effect on CSBI. CSBI holds all
Permits that are material to the operation of its business, and is in compliance
with the terms of each such Permit except where the failure so to comply,
individually or in the aggregate, would not have a Material Adverse Effect on
CSBI. Except as disclosed on Schedule 4.5 or Schedule 4.6, no investigation by
any Governmental Entity with respect to CSBI is pending or, to CSBI's Knowledge,
contemplated.
27
28
4.10 BROKERS. CSBI has not employed any broker, finder or similar Person
in connection with the Merger other than Xxxxxxxxx & Company, and has not
incurred and will not incur any broker's, finder's or similar fees, commissions
or expenses in connection with the Merger other than those of Xxxxxxxxx &
Company and (to the extent deemed to be in connection with the Merger) those of
any placement agent or similar Person employed in connection with the Merger
Financing, each of whose fees shall be borne entirely by CSBI.
4.11 FINANCIAL CAPACITY. CSBI has delivered to Eldorado true and correct
copies of (a) a commitment letter relating to investments in CSBI in the
aggregate amount of $63,300,000 and (b) certain subscription agreements each
relating to investments in CSBI in the aggregate amount of not less than
$18,000,000. All representations made to CSBI's sources of Merger Financing in
the applicable subscription agreements or securities purchase agreements are (or
when such agreements are executed, will be) true and correct in all material
respects as of the date of each such representation or warranty. Notwithstanding
the foregoing, the obligations of CSBI hereunder are not conditioned upon its
obtaining financing.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 DISCUSSIONS WITH THIRD PARTIES.
5.1.1 Until the earlier of the Effective Time or the termination
of this Agreement, Eldorado (a) shall not, and shall instruct its
Representatives not to, solicit or encourage, directly or indirectly, inquiries
or proposals with respect to any Strategic Transaction Proposal, and (b) except
as expressly permitted by Section 5.1.2 or Section 5.1.3, shall not, and shall
instruct its Representatives not to, furnish any non-public information relating
to or participate in any negotiations, discussions or other activities
concerning, any Strategic Transaction with any Person other than CSBI and Merger
Sub. Eldorado shall notify CSBI promptly after any Strategic Transaction
Proposal is received by, or any negotiations or discussions regarding a
Strategic Transaction Proposal are sought to be initiated (or continued) with,
directly or indirectly, Eldorado or any of its Representatives, and shall
disclose to CSBI the identity of the third party making or seeking to make such
Strategic Transaction Proposal, the terms and conditions of such Strategic
Transaction Proposal and such other information as CSBI reasonably may request;
provided, however, that if Eldorado receives a Strategic Transaction Proposal
and the foregoing disclosure of such Proposal to CSBI would violate a
confidentiality agreement by which Eldorado is bound, Eldorado (a) shall make
the foregoing disclosure only to the maximum extent permissible under such
confidentiality agreement, (b) shall return such Strategic Transaction Proposal
to the initiating party without substantive response (together with, if so
elected by Eldorado, a copy of this Section 5.1), and (c) to the extent such
disclosure has not
28
29
been made under clause (a), shall notify CSBI that a Strategic Transaction
Proposal has been received and that the same has been returned to the initiating
party without substantive response. Without limiting the foregoing, it is
understood and agreed that any failure by any of Eldorado's Representatives to
abide by the limitations set forth in this Section 5.1 shall constitute a breach
of this Section 5.1 by Eldorado regardless of whether such Representative's
actions were authorized by or purported to be undertaken on behalf of Eldorado.
5.1.2 Notwithstanding Section 5.1.1 or any other provision of
this Agreement to the contrary, in the event that, on an entirely unsolicited
basis, Eldorado receives a Strategic Transaction Proposal from a third party,
and Eldorado's counsel advises the Board of Directors that the Directors'
fiduciary duties owed to the Shareholders obligate the Board to furnish
non-public information to the third party having submitted such Proposal, then
Eldorado shall not be prohibited from furnishing to such third party, either
directly or to or through its Representatives, information that was previously
provided or made available to CSBI (or, if not previously requested by CSBI and
therefore not previously provided, that is contemporaneously provided to CSBI)
or from answering questions regarding the information so furnished (but not
about the terms of any possible Strategic Transaction), provided that the third
party shall have entered into a confidentiality agreement substantially similar
to the confidentiality provisions of Section 5.3 hereof, or from seeking
clarifications regarding (but not conducting negotiations regarding) the terms
of such Proposal or the consideration contemplated therein or information
regarding the Person making such Proposal.
5.1.3 Notwithstanding Section 5.1.1 or any other provision of
this Agreement to the contrary, following receipt of a Qualifying Strategic
Transaction Proposal, neither Eldorado nor any of its Representatives shall be
prohibited from taking, nor shall it be a breach of this Agreement for Eldorado
or any of its Representatives to take, any of the following actions with respect
to a Strategic Transaction Proposal: (a) engaging in discussions or negotiations
with a third party which has made a proposal that satisfies the requirements of
a Qualifying Strategic Transaction Proposal, (b) taking and disclosing to the
Shareholders a position contemplated by Rule 14e-2 under the Exchange Act or
otherwise making disclosure of the Qualifying Strategic Transaction Proposal to
the Shareholders, (c) taking any of the actions described in Section 5.2.2 or
(d) subject to the terms of Article VII, terminating this Agreement. A
"Qualifying Strategic Transaction Proposal" shall mean a bona fide written
Strategic Transaction Proposal (which Proposal may be conditional) that (x) is
delivered to the Board of Directors (whether directly or through a
Representative of Eldorado), (y) identifies a price or range of values to be
paid for the capital stock, assets or liabilities of Eldorado or the Bank that
are to be sold or otherwise transferred pursuant to such Proposal, and (z) in
the good faith determination of the Board of Directors of Eldorado, based on the
advice of Eldorado's counsel and on a written opinion of Eldorado's investment
bankers to the effect that such Proposal is financially more favorable to the
Shareholders than the terms of the Merger (including due to a higher price or
range of values
29
30
offered by such Proposal), requires the Board of Directors to take (or cause
Eldorado to take) one or more of the actions described in clauses (b) through
(e) of the immediately preceding sentence in order to comply with the Board of
Directors' fiduciary duties owed to the Shareholders.
5.1.4 In the event that Eldorado receives a Qualifying Strategic
Transaction Proposal, it shall not accept or enter into any agreement which
provides for the consummation of the Strategic Transaction described in such
Proposal for a period of at least 72 hours after the delivery to CSBI of a copy
of such Proposal. Upon compliance with the foregoing and termination of this
Agreement pursuant to Section 7.4.2 hereof (including the payment in full to
CSBI of the Termination Fee as provided in Section 7.6.3), Eldorado may enter
into any agreement that provides for the consummation of such Qualifying
Strategic Transaction. If, within twenty (20) calendar days following Eldorado's
receipt of a Qualifying Strategic Transaction Proposal, Eldorado has neither (i)
given notice to CSBI reaffirming Eldorado's intent to proceed under this
Agreement and to consummate the Merger, or (ii) terminated this Agreement
pursuant to Section 7.4.2, CSBI may at any time within thirty (30) days after
the close of such period terminate this Agreement pursuant to Section 7.3.2.
5.1.5 Eldorado shall be entitled to provide copies of this
Section 5.1 to third parties who, on an entirely unsolicited basis after the
date hereof, contact Eldorado to express their interest in a possible Strategic
Transaction with Eldorado or the Bank, provided that CSBI shall concurrently be
notified of such contact and the delivery of such copy.
5.2 PROXY STATEMENT; SHAREHOLDER MEETING.
5.2.1 Eldorado shall use all reasonable efforts to prepare and
distribute the Proxy Statement to the Shareholders as promptly as practicable,
to duly call, give notice of, convene and hold a meeting of the Shareholders to
be held as soon as is reasonably practicable thereafter for the purpose of
voting upon the approval of the Merger (including any adjournments thereof, the
"Shareholder Meeting"), and at such meeting (including any adjournments thereof)
to obtain the Shareholders' approval of the Merger. Except as expressly provided
in Section 5.2.2, the Proxy Statement shall include a Recommendation of Approval
by the Board of Directors, and shall further include the fairness opinion
referenced in Section 3.23 as an exhibit thereto. Eldorado shall use all
reasonable efforts to prepare and file the preliminary Proxy Statement with the
SEC within twenty-five (25) Business Days after the date of this Agreement.
Eldorado shall deliver to CSBI and afford CSBI an opportunity to comment on
drafts of the Proxy Statement prior to the filing of the preliminary Proxy
Statement with the SEC and prior to the distribution of the definitive Proxy
Statement to Shareholders, provided that (a) the period within which the
preliminary statement must be filed with the SEC shall be extended by a number
of Business Days in excess of five (5) elapse between the date that a
substantially complete draft thereof is
30
31
forwarded to CSBI and the date that CSBI furnishes its comments on such draft,
and (b) if CSBI has failed to furnish comments within ten (10) Business Days of
its receipt of the applicable materials, Eldorado shall be free to file the
preliminary Proxy Statement or distribute the definitive Proxy Statement, as
applicable. None of the information included, directly or by incorporation by
reference, in the Proxy Statement will, at the date of mailing to the
Shareholders or at any time through the time of the Shareholder Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that Eldorado makes no representations regarding
any information supplied to Eldorado by CSBI. The Proxy Statement will comply as
to form in all material respects with the applicable provisions of the Exchange
Act and the rules and regulations thereunder. CSBI shall cooperate in all
reasonable respects with Eldorado in the preparation of the Proxy Statement,
including by making available to Eldorado all information regarding CSBI that
Eldorado reasonably may request and that is reasonably necessary or appropriate
for inclusion in or for the preparation of the Proxy Statement. CSBI hereby
represents and warrants that no statement of fact relating to CSBI or Merger Sub
that is made in writing by CSBI to Eldorado for inclusion in the Proxy
Statement, and that is in fact so included, will be false or misleading in any
material respect or will omit to state a material fact necessary in order to
make the statements made, in the light of the circumstances under which they
were made or disclosed, not misleading. Eldorado shall use its best efforts to
take all action necessary for the Merger not to be subject to any state
anti-takeover statute.
5.2.2 In the event that Eldorado has received a Strategic
Transaction Proposal and the Board of Directors has determined, in accordance
with Section 5.1.3, that such Strategic Transaction Proposal constitutes a
Qualifying Strategic Transaction Proposal, then the Board of Directors shall not
be prohibited from taking, nor shall it be a breach of this Agreement if it
takes, any of the following actions: (a) failing to include a Recommendation of
Approval in the Proxy Statement, (b) retracting or qualifying its Recommendation
of Approval if previously given, or (c) postponing or adjourning the meeting of
Shareholders called for the purpose of approving the Merger.
5.3 ACCESS. Eldorado shall make available to CSBI all information
regarding Eldorado that CSBI reasonably may request and shall authorize all
reasonable visits to Eldorado's premises with such staff, consultants and
experts as CSBI reasonably may request. CSBI agrees to coordinate closely all
such activities with Eldorado's President or Chief Financial Officer and to
conduct any such inquiries with appropriate discretion and sensitivity to
Eldorado's relationships with its employees, customers and suppliers. The
Parties acknowledge that certain of the information made available to one
another pursuant to this Section 5.3 and otherwise in connection with the Merger
may be confidential, proprietary or otherwise nonpublic, and each Party agrees,
for itself and for each of Representatives, that it (i) shall hold
31
32
in confidence all confidential information received by it from or with regard to
the other Party ("Confidential Information") subject to the terms of this
Section 5.3, (ii) shall disclose such Confidential Information only to those of
its Representatives and, in the case of CSBI, its current or prospective
investors and other sources of capital, in each case having a need to know the
same for purposes of evaluating, negotiating or implementing the financing of
the Merger, and (iii) shall inform each Representative or current or prospective
investor to whom Confidential Information is disclosed that such information is
confidential and shall obtain from such Representative or investor a
confidentiality agreement in substantially the form previously provided by CSBI
to Eldorado. Each Party shall remain responsible for any disclosure of
Confidential Information by any of its Representatives or investors. Each Party
further agrees that, upon the request of the other Party given following any
termination of this Agreement, it and each of its Representatives either shall
return to such other Party all Confidential Information received by it and its
Representatives (including all compilations, analyses or other documents
prepared by it that contain Confidential Information) or shall certify that the
same has been destroyed. As used herein, Confidential Information shall not
include (i) information that is or becomes generally available to the public
other than as a result of a breach of this Agreement, (ii) information that the
receiving Party demonstrates was known to it on a non-confidential basis prior
to receiving such information from the other Party, (iii) information that the
receiving Party develops independently without relying on Confidential
Information, and (iv) information that becomes available to the receiving Party
on a non-confidential basis from another source if the source was not known to
be, and not reasonably believed by the receiving Party to be, subject to any
prohibition against disclosing such information.
5.4 COOPERATION. The Parties shall cooperate with each other and use all
commercially reasonable efforts to prepare and file promptly all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the Merger. The Parties agree that they
will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the Merger and the Bank Mergers,
and each Party will keep the other apprised of the status of matters relating to
completion of the Merger and the Bank Mergers. Each Party shall, upon request,
furnish the other Party with all information concerning itself as may be
reasonably necessary or advisable in connection with any filing or application
made by or on behalf of such Party to any Governmental Entity in connection with
the Merger or the Bank Mergers. Each Party shall promptly advise the other Party
upon receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the Merger or the Bank Mergers which
causes such Party to believe that there is a reasonable likelihood that any
required Governmental Approval will not be obtained or that the receipt of any
such Governmental Approval will be materially delayed. Eldorado shall cooperate
with
32
33
CSBI in all reasonable respects, upon the request of CSBI, in CSBI's
finalization of its financing of the Merger, including by furnishing all
information reasonably requested in connection therewith.
5.5 ADVICE OF CHANGES. Each Party shall promptly advise the other Party
of any change or event having a Material Adverse Effect on it or its ability to
perform its obligations under this Agreement or which it believes would or may
be reasonably likely to cause or constitute a material breach of any of its
representations, warranties or covenants contained herein or to preclude the
satisfaction of one or more of the conditions set forth in Article VI. From time
to time prior to the Closing Date, Eldorado will promptly supplement or amend
the Disclosure Schedules to reflect any matter which, if existing, occurring or
known at the date of this Agreement, would have been required to be set forth or
described in such Disclosure Schedules, or which is necessary to correct any
information in such Disclosure Schedules which has been rendered inaccurate
thereby (each notice furnishing such information being called a "Disclosure
Supplement"); provided, however, that any such Disclosure Supplement which
reports events, developments or changes that have occurred subsequent to the
date hereof shall not constitute a breach of any representations and warranties
of Eldorado but also shall not have any effect for the purpose of determining
the accuracy of any representation or warranty when made, for determining
satisfaction of the conditions set forth in Article VI, or for determining the
compliance by Eldorado with any other provision of this Agreement; provided
further, that (a) except as provided in the immediately following sentence,
unless CSBI notifies Eldorado that CSBI elects to terminate this Agreement
pursuant to Section 7.3.1 or Section 7.3.3 on the basis of the events or
conditions disclosed in such Disclosure Supplement within twenty (20) Business
Days after the date of CSBI's receipt thereof (the "Notification Date"), CSBI
shall thereafter be deemed to have waived any right of termination attributable
solely to such events or conditions, but (b) for purposes of determining the
satisfaction of the condition set forth in Section 6.2.2, no such waiver shall
exist (i) with respect to the cumulation of such events or conditions with other
events or conditions requiring disclosure under the same representation or
warranty and described in any subsequent Disclosure Supplement or otherwise
discovered by CSBI or (ii) if there is a further material adverse development in
the event or condition so disclosed. Notwithstanding the foregoing clause (a)
if, in the reasonable opinion of CSBI, the information provided in such
Disclosure Supplement is insufficient for CSBI to evaluate fully whether the
identified event or condition constitutes or contributes to a failure of the
condition to closing set forth in section 6.2.1, then with respect to such event
or condition, the Notification Date may be extended, at the election of CSBI,
until such date as CSBI has received from Eldorado sufficient information to
make the evaluation contemplated by this sentence. In order to so extend the
Notification Date, CSBI must provide Eldorado with written notice of such
extension not later than the initial Notification Date, which notice shall (x)
specify each event or condition as to which the extension is being made, and (y)
set forth in reasonable detail the information
33
34
that CSBI requires in order to make the evaluation of each such event or
condition as contemplated by the immediately preceding sentence.
5.6 CURRENT INFORMATION. During the period from the date of this
Agreement to the Closing Date, Eldorado will cause one or more of its designated
representatives to confer on a regular and frequent basis (not less than
bi-weekly) with representatives of CSBI and to report the general status of the
ongoing operations of Eldorado. Eldorado will promptly notify CSBI of (a) any
material adverse change in the normal course of business or in the operation of
the properties of Eldorado, (b) any governmental complaint, investigation or
hearing (or communications indicating that the same may be contemplated), or (c)
the institution or the threat of material litigation involving Eldorado, and
will keep CSBI fully informed of such events. Eldorado will keep CSBI fully
informed of the status of, and the action proposed to be taken with respect to,
Classified Assets that, in combination with all related Borrower Group
Obligations, have an aggregate carry value of $100,000 or more. Eldorado will
provide to CSBI copies of the minutes (or consents in lieu of meeting) of its
loan committee, its Board of Directors and all committees thereof promptly
following each such meeting; provided, however, that Eldorado may omit therefrom
any portion of such minutes that it determines, with the concurrence of its
counsel, relates to (a) the Parties' compliance or non-compliance with the terms
of this Agreement, or (b) any Strategic Transaction Proposal other than the
Merger or (c) any matter which is subject to an attorney-client privilege.
5.7 INTERIM AND ANNUAL FINANCIAL STATEMENTS. As soon as reasonably
available, but in no event more than 45 days after the end of each fiscal
quarter ending after the date of this Agreement and prior to the Closing Date
(excepting the quarter ending December 31, 1996), Eldorado will deliver to CSBI
its Quarterly Reports on Form 10-Q as filed with the SEC, and as soon as
reasonably available, but in no event later than March 31, 1997 (provided that
the Closing has not yet occurred and the Agreement has not theretofore been
terminated), Eldorado will deliver to CSBI its Annual Report on Form 10-K for
the period ending December 31, 1996, as filed with the SEC. Eldorado will
deliver to CSBI monthly financial statements (the "Monthly Financial
Statements") no later than the time at which such financial statements are
delivered to such Directors but in no event later than the twenty-first calendar
day of the month immediately following the month to which such financial
statements relate. When delivered, the Monthly Financial Statements will present
fairly, in all material respects, the financial condition of Eldorado and its
results of operations as at and for the period then ended, will reflect in all
respects GAAP accounting treatment of the matters contained therein (except as
expressly noted thereon), and will be prepared in the manner and in the form
customarily delivered to the Board of Directors.
5.8 CONDUCT OF BUSINESS BY ELDORADO. Subject to Section 5.1, Eldorado
shall (a) conduct its business in the usual, regular and ordinary course of
business consistent with past
34
35
practice (except as required by applicable Law or by this Agreement), (b) use
all reasonable efforts to maintain and preserve intact its business
organization, employees and advantageous business relationships and retain the
services of its officers and key employees (including by causing its current
insurance policies not to be cancelled or terminated or any of the coverage
thereunder to lapse prior to or upon the Closing or closing of the Bank Mergers,
unless simultaneously with such event replacement policies providing
substantially similar coverage for substantially similar (or lesser) premiums
are in full force and effect), (c) conduct relations with its employees,
including hiring and terminating practices, only in the ordinary course of
business and consistent with past practice, and (d) take no action which would
adversely affect or delay the ability of Eldorado or CSBI or any of their
respective direct or indirect subsidiaries to obtain any necessary approvals of
any Governmental Entity required for the Merger or for the transactions
contemplated in connection therewith, or to perform its covenants and agreements
under this Agreement.
5.9 CERTAIN OPERATING COVENANTS. Without CSBI's prior written consent
(which consent, in the case of Sections 5.9.9 through 5.9.14, shall not be
unreasonably withheld or delayed), Eldorado shall not, and in the case of
Section 5.9.7, the Eldorado officers identified in the definition of "Eldorado's
Knowledge" shall not:
5.9.1 declare or make any payment or distribution with respect to
the capital stock or other securities of Eldorado Bancorp, whether by way of
payment of interest or principal, redemption, dividend or otherwise, excepting
regular quarterly cash dividend payments on the Common Stock, with such record
dates and at such amounts per share as are set forth on Schedule 5.9.1 (provided
that the applicable record date is not later than the date anticipated for the
Closing at the time such dividend would otherwise have been declared) and
declared by the Board of Directors no earlier than the declaration date set
forth on Schedule 5.9.1 opposite the applicable record date; provided, however,
that if any dividend so declared as of to the Closing Date has not been paid
prior to the Closing Date, Eldorado may deliver adequate funds for the payment
of the same to its stock transfer agent prior to the Closing Date, for payment
to the Shareholders entitled thereto on or before the scheduled payment date;
5.9.2 (a) create, authorize, issue, sell or deliver any of its
capital stock, bonds or other of its securities (whether authorized and unissued
or held in treasury) or any instrument convertible into any of them, excepting
only by the issuance of shares of Common Stock upon the exercise of one or more
currently outstanding Options in accordance with the present terms of such
Option; (b) grant or otherwise issue any options, warrants or other rights with
respect thereto; (c) amend the terms of any currently outstanding option
(including any Option), warrant or other right with regard to Eldorado's
securities; or (d) split up, combine or reclassify any of its outstanding stock;
35
36
5.9.3 acquire, by merging or consolidating with, by purchasing a
substantial equity interest in or a substantial portion of the assets of, or by
any other manner, any business, including any corporation, partnership,
association or other business organization or division thereof;
5.9.4 excepting those matters identified on Schedule 5.9.4,
(a) create, renew, amend or terminate, or give notice of a
proposed renewal, amendment or termination of, (i) any material contract,
agreement or lease for goods, services or office space to which Eldorado is (or
would thereby be) a party or by which Eldorado or any of its properties is (or
would thereby be) bound, excepting only contracts, agreements and leases under
which the aggregate payments by either party over the term of the agreement do
not exceed $50,000 (or, if indefinite, are not reasonably expected to exceed
$50,000), (ii) any agreement the benefits of which (to either party) will accrue
or be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of the Merger or the Bank Mergers (either alone or upon the
occurrence of any additional acts or events) or the value of any of the benefits
under which will be calculated on the basis of the Merger or the Bank Mergers or
any portion or aspect of either (including any so-called retention or similar
bonuses), (iii) any agreement relating to non-competition or secrecy, or (iv)
any agreement that materially restricts the conduct of any line of business by
Eldorado,
(b) make any single capital expenditure exceeding $25,000 or
any capital expenditures exceeding $100,000 in the aggregate, or
(c) relocate or terminate, or file any application to relocate
or terminate, the operations of any of its banking offices (including loan
production offices);
5.9.5 enter into any new line of business;
5.9.6 change its methods of accounting in effect at December 31,
1995, except as required by changes in GAAP or RAP as concurred with by
Eldorado's independent auditors;
5.9.7 fail to use all reasonable efforts to prevent Eldorado from
committing a Violation of any Law, Regulatory Agreement or any material contract
or license to which Eldorado is a party or by which it or any of its properties
is bound, which Violation, individually or in the aggregate, has or reasonably
could be expected to have a Material Adverse Effect on Eldorado.
5.9.8 make any equity investment in any real estate or real
estate development project, other than (a) additional investments in existing
projects as set forth on Schedule 5.9.8,
36
37
or (b) in connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructurings in the ordinary course of business
consistent with prudent banking practices;
5.9.9 sell, lease, assign, transfer or otherwise dispose of any
property or asset, except for (a) investment portfolio transactions in the
ordinary course of business and substantially consistent with past practice; (b)
sales, in the ordinary course of business, of SBA Loans (or portions of such
loans) under which the final disbursement was made after the Most Recent Balance
Sheet Date; and (c) sales of assets having a gross book value not in excess of
$25,000 individually or $100,000 in the aggregate;
5.9.10 except as provided on Schedule 5.9.10, (a) enter into,
renew or amend any agreement relating to employment, salary continuation,
severance, consulting, collective bargaining or otherwise relating to the
provision of personal services or payment therefor, (b) institute, amend or
terminate any Eldorado Benefit Plan, (c) enter into, renew or amend any
agreement that, upon the consummation of the Merger or the Bank Mergers, will
result in any payment (whether of severance pay or otherwise) becoming due from
CSBI, the Surviving Corporation or the Bank to any officer or employee of the
Surviving Corporation or the Bank or formerly of Eldorado, (d) pay any pension
or retirement allowance to any Person not required by an existing plan or
agreement, (e) increase in any manner the compensation or fringe benefits of
(including by payment of a bonus in excess of the bonus paid to such Person in
the preceding year), any officer, director or employee except (i) as set forth
on Schedule 3.12, (ii) as required by an employment agreement identified on
Schedule 3.17, or (iii) customary annual (or less frequent) increases in the
wages or salaries of Non-Contract Employees and customary annual (or less
frequent) bonuses to Non-Contract Employees, in each case consistent with past
practice and which on an annualized basis do not increase the aggregate
personnel costs for all Non-Contract Employees by more than 3% over the levels
in effect as of September 30, 1996, or (f) increase any other direct or indirect
compensation or employee benefit for or to any of its officers, directors or
employees;
5.9.11 make, amend or compromise any loan or advance (whether in
cash or other property) to any officer, to any director, or to any holder of
record or beneficial owner of 3% or more of the Common Stock, except advances
made to employees in the usual, regular and ordinary course of business
consistent with past practice;
5.9.12 (a) make, amend or renew, or enter into any commitment to
make, amend or renew, any loan if, as a result of the disbursement of the
proceeds of such loan, the total Borrower Group Obligations (including accrued
and unpaid interest) of the borrower to Eldorado would exceed $750,000, except
that if CSBI does not grant or refuse its consent or reasonably request
additional information regarding such proposed loan within three Business Days
of CSBI's receipt of Eldorado's request for consent, then CSBI shall be deemed
to have granted
37
38
its consent; or (b) amend or renew, or enter into any commitment to amend or
renew, any Criticized Asset as to which the aggregate unpaid balance (including
accrued and unpaid interest) of such loan and all related Borrower Group
Obligations exceeds $100,000.
5.9.13 incur any indebtedness for borrowed money, or assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other Person, in each case except in the usual, regular and
ordinary course of business consistent with past practice, it being understood
and agreed that the creation of deposit liabilities, purchases of federal funds,
sales of certificates of deposit and entrance into repurchase agreements shall
be deemed to be in the ordinary course of business so long as the maturity of
such indebtedness does not exceed (a) 36 months in the case of retail
certificates of deposit in amounts of less than $100,000, (b) 24 months in the
case of retail certificates of deposit from the Bank's primary market area in
amounts of $100,000 or more, and (c) 12 months in the case of all other such
indebtedness;
5.9.14 except as described on Schedule 5.9.14, (a) restructure or
materially change its investment securities portfolio through purchases, sales
or otherwise, or the manner in which the portfolio is classified or reported, it
being understood and agreed that investment portfolio transactions in the
ordinary course of business and substantially consistent with past practice
shall be deemed to constitute a material change in Eldorado's investment
portfolio only if the number and/or nature of such transactions causes a
material change in the makeup of the portfolio taken as a whole, or (b) classify
as "held to maturity" any investment security acquired after the date hereof
(including those acquired in replacement of existing held-to-maturity
securities); or
5.9.15 enter into any agreement or commitment to do any of the
foregoing.
5.10 PROSECUTION OF REGULATORY FILINGS. CSBI shall prepare and file all
applications necessary to obtain the CSBI Governmental Approvals (using all
reasonable efforts to file the same in draft or preliminary form no later than
the thirtieth (30th) Business Day following the date of this Agreement, and
thereafter shall use all reasonable efforts to prosecute such applications and
to obtain the CSBI Governmental Approvals. [Obligation to seek waiver.]
5.11 COVENANTS REGARDING EMPLOYEES, DIRECTORS AND OFFICERS.
5.11.1 Employee Benefit Plans.
(a) From and after the Effective Time, and subject to
applicable law, CSBI shall provide employee benefits, including those under
Benefit Plans, to those of its (including its subsidiaries') employees who
formerly were employees of Eldorado substantially the same
38
39
as the benefits provided to similarly situated employees of CSBI. From and after
the Effective Time, employees of CSBI (including its subsidiaries) who were
employees of Eldorado immediately prior to the Effective Time shall receive full
credit for all purposes under such plans for their years of service at Eldorado
and (any predecessors thereto) prior to the Effective Time.
(b) CSBI shall honor in accordance with their terms (i) all
Eldorado Benefit Plans and (ii) all contracts, arrangements and commitments
described in Section 3.17(c) that are disclosed on Schedule 3.17 and (iii) all
benefits vested thereunder as of the Effective Time; provided, however, that
nothing in this sentence shall be interpreted as preventing CSBI from amending,
modifying or terminating any Eldorado Benefit Plans, contracts, arrangements or
commitments in the manner and to the extent permitted by the terms thereof.
5.11.2 Indemnification; Directors' and Officers' Insurance.
(a) In the event of any threatened or actual claim, action,
suit, proceeding or investigation, whether civil, criminal or administrative,
including any such claim, action, suit, proceeding or investigation in which any
person who is now, or has been at any time prior to the date of this Agreement,
or who becomes prior to the Effective Time, a director or officer or employee of
Eldorado (including any of its subsidiaries) (the "Indemnified Parties") is, or
is threatened to be, made a party based in whole or in part on, or arising in
whole or in part out of, or pertaining to (i) the fact that he or she is or was
a director, officer or employee of Eldorado or any of its predecessors, or (ii)
this Agreement or any of the transactions contemplated hereby, in any case
whether asserted or arising before or after the Effective Time, the Parties
hereto agree to cooperate and use their best efforts to defend against and
respond thereto.
(b) After the Effective Time, and for a period of six years
thereafter, CSBI shall indemnify and hold harmless and defend, each such
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorney's fees and expenses in advance of the
final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent Eldorado's directors are so indemnified
under the Eldorado Indemnification Rights as of the date hereof), judgments,
fines and amounts paid in settlement in connection with any such threatened or
actual claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or pertaining to any
action or omission that occurred, or has been alleged to have occurred, at any
time prior to the Effective Time or the respective times they cease be directors
or officers of Eldorado or the Bank (as applicable), whichever is later, or
arising out of or pertaining to this Agreement or the other agreements entered
into or approved by the Eldorado Directors in connection with the transactions
contemplated by this Agreement (specifically including the implementation of any
modification, change or adjustment pursuant to Section 5.13.2) (collectively,
the
39
40
"Indemnified Liabilities, Expenses and Claims"), in each instance as and to the
fullest extent that the directors of Eldorado, as of the date hereof, would be
entitled to be indemnified by Eldorado or the Bank pursuant to their respective
Articles of Incorporation and under whichever of the respective Bylaws, or the
Indemnification Agreements, as in effect on the date hereof, would provide such
directors with the most extensive indemnification rights (hereinafter the
"Eldorado Indemnification Rights"), with respect to such Indemnified
Liabilities, Expenses and Claims if they had arisen prior to the Effective Time.
In the event of any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the Effective Time),
the Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with CSBI; provided, however, that (i) except as otherwise provided
hereinafter, CSBI shall have the right to assume the defense thereof with
counsel reasonably acceptable to the Indemnified Parties, and upon such
assumption CSBI shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except that if counsel
for the Indemnified Parties reasonably advises the Indemnified Parties that
there are issues which raise conflicts of interest between CSBI and the
Indemnified Parties or among the Indemnified Parties, the Indemnified Parties
may retain counsel reasonably satisfactory to them after consultation with CSBI,
and CSBI shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties, (ii) CSBI shall be obligated pursuant to this paragraph to
pay for only one firm of counsel for all Indemnified Parties in the absence of a
conflict of interest (determined as described above) among the Indemnified
Parties in each jurisdiction in which any such claim, actions, suit, proceeding
or investigation is brought, and shall be obligated pursuant to this paragraph
to pay for no more than two firms of counsel among all Indemnified Parties in
each such jurisdiction in the event of a conflict of interest (determined as
described above) among the Indemnified Parties, (iii) CSBI shall not be liable
for any settlement effected without its prior written consent, which it shall
not unreasonably withhold, (iv) CSBI shall have no obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and nonappealable,
that indemnification of such Indemnified Party in the manner contemplated hereby
is prohibited by applicable Law and such Law makes unenforceable the indemnity
otherwise provided hereunder or under the Indemnification Agreements, and (v)
CSBI shall have no obligation hereunder to any Indemnified Party with respect to
any threatened or actual claim, action, suit, proceeding or investigation, or
any loss or expense caused thereby, arising out of any action (or failure to
act) that has been determined by a judgment of a court having competent
jurisdiction and that has been final and non-appealable to have been a material
breach of this Agreement, provided that CSBI proves that such act or omission
was intentionally or recklessly committed by such Indemnified Party. Unless and
until there shall be a final judicial determination that a person who is
otherwise an Indemnified Party is not entitled to indemnification hereunder with
respect to a given claim or proceeding, CSBI shall advance all expenses with
respect to which an Indemnified Party is entitled to indemnity hereunder by
paying the same to the Indemnified Party
40
41
or to the counsel or other Person to whom they are owed within twenty (20) days
following delivery of a written request therefor by such Indemnified Party to
CSBI. Each Indemnified Party with respect to whom expenses have been so advanced
hereby undertakes to repay such amount advanced only if, and to the extent that,
it shall ultimately be determined that such Indemnified Party is not entitled to
be indemnified by CSBI pursuant to this Section 5.11. Any Indemnified Party
wishing to claim indemnification under this Section 5.11.2, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify CSBI
thereof, provided that the failure to so notify shall not affect the obligations
of CSBI under this Section 5.11.2 except to the extent such failure to notify
materially prejudices CSBI. CSBI's obligations under this Section 5.11.2
continue in full force and effect for a period of six (6) years from the
Effective Time and, with respect only to any claim asserted or made prior to or
within such period, thereafter until the final disposition of such claim.
(c) CSBI shall use its best efforts to cause the persons
serving as officers and directors of Eldorado or the Bank immediately prior to
the Effective Time, and any former officers or directors thereof who were
covered by directors and officers' liability insurance maintained by Eldorado or
the Bank immediately prior to the Effective Time, to be covered for a period of
six (6) years from the Effective Time by the directors' and officers' liability
insurance policy maintained by Eldorado (provided that CSBI may substitute
therefor policies of at least the same coverage and amounts containing terms and
conditions which are not less advantageous than such policy) with respect to
acts or omissions occurring, or alleged to have occurred, prior to the Effective
Time of such officers and directors in their capacity as such; provided,
however, that in no event shall CSBI be required to expend more than 200% of the
current amount expended by Eldorado to maintain or procure insurance coverage
pursuant hereto and further provided that if CSBI is unable to maintain or
obtain the insurance called for by this Section 5.11.2(c), CSBI shall obtain as
much comparable insurance as available for an amount equal to 200% of the amount
currently expended therefor by Eldorado.
(d) For a period of six years after the Effective Time, the
Surviving Corporation and CSBI will fulfill and honor in all respects the
obligations of Eldorado or the Bank, as the case may be, pursuant to
indemnification agreements in existence at the date of this Agreement that
Eldorado or the Bank has with its respective directors, officers and certain
other employees (the "Indemnification Agreements"). Such Indemnification
Agreements have been made available to CSBI.
(e) This Section 5.11.2, which shall survive consummation of
the Merger at the Effective Time and shall (i) continue in effect for the
respective periods of time set forth herein, (ii) is intended to benefit each
present and former director and officer of Eldorado or the Bank and any other
person, including any employee of Eldorado or the Bank, who is entitled by the
express terms of this Section to any rights hereunder (and each of whom shall be
entitled
41
42
to enforce the provisions of this Section), and (iii) shall be binding on all
successors and assigns of each of CSBI, the Surviving Corporation, Eldorado and
the Bank. In the event CSBI or any of its successors or assigns (i) consolidates
with or merges into any other Person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or substantially all of its properties and assets to
any Person, then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns of CSBI or the
continuing or Surviving Corporation or entity, or the purchaser or transferee of
such properties and assets, as the case may be, assume the obligations set forth
in this section.
5.12 FINANCING MATTERS.
5.12.1 Information Regarding Financing. Between the date hereof
and the Effective Time, CSBI shall provide to Eldorado, not later than the last
Business Day of each month, updates describing the status of CSBI's financing
for the Merger (the "Merger Financing"), including reports on its progress in
satisfying any conditions precedent thereto (other than the conditions relating
to, or also constituting conditions precedent to, the consummation of the
Merger), and attaching copies of definitive investment documents (or amendments
thereto) entered into during the month then ended. Further, CSBI shall advise
Eldorado, promptly after their occurrence, of any developments, changes, events
or circumstances occurring after the date hereof that will or could reasonably
be expected to have a material and adverse effect on CSBI's ability to satisfy
any material conditions to the Merger Financing or otherwise to consummate the
Merger Financing. As of the Closing Date, CSBI will have received valid and
binding subscription agreements for investments in CSBI payable on or before the
Closing Date, that make available to CSBI adequate funds such that CSBI can
deliver (or cause to be delivered) at the Closing the aggregate amount of the
Merger Consideration.
5.12.2 Additional Financing to be Obtained. In addition to the
Merger Financing that CSBI has represented (under Section 4.11) has been
arranged prior to the date hereof, CSBI shall use its best efforts to obtain,
and provide to Eldorado, by December 31, 1996 one or more commitment letters or
subscription agreements (the "Remaining Financing Commitments") for additional
Merger Financing in an amount not less than $8,600,000. To the extent reasonably
requested by Eldorado's financial advisor, CSBI shall also provide to Eldorado
reasonable information substantiating the financial capacity of the party(ies)
to such Remaining Financing Commitments. At any time on or after January 1,
1996, if CSBI has not provided copies of Remaining Financing Commitments
representing Merger Financing in the amount required by this Section 5.12.2
prior to the giving of such notice, Eldorado may give notice to CSBI that
significant doubt has arisen regarding CSBI's ability to close on the Merger
Financing and
42
43
demanding written assurances regarding the availability of the Merger Financing
as contemplated by Section 5.12.3. In the event of such a demand, CSBI shall be
obligated to deliver assurances and other documentation in the manner and by the
deadline provided under Section 5.12.3.
5.12.3 Changes in Financing Status. In the event that, between the
date hereof and the Effective Time, (a) it is determined that any of CSBI's
representations and warranties contained in this Agreement shall not have been
true and correct as of the dates when made and, as a consequence thereof,
Eldorado reasonably determines that there is significant doubt regarding CSBI's
ability to close on any portion of the Merger Financing representing 15% or more
of the aggregate Merger Consideration, or (b) there shall occur any other event
that causes Eldorado reasonably to determine that there is significant doubt
regarding CSBI's ability to close on any portion of the Merger Financing
representing 15% or more of the aggregate Merger Consideration, Eldorado may, by
notice to CSBI, demand written assurances regarding the continued availability
of the Merger Financing. In the event of such a demand, CSBI shall, within
twenty (20) Business Days after Eldorado's notice, deliver to Eldorado either
(x) written confirmation from those financing sources as to which such doubt had
arisen confirming that such sources remain prepared to supply their respective
portions of the Merger Financing together with, if applicable (based on the
nature of the foregoing doubt) information reasonably acceptable to Eldorado's
financial advisor substantiating the financial capacity of such sources to
supply such funds, and/or (y) one or more commitment letters or subscription
agreements for substitute Merger Financing in an aggregate amount not less than
the amount of Merger Financing as to which Eldorado reasonably considers such
doubt not to have been alleviated in all material respects pursuant to clause
(x).
5.13 ELDORADO ACCRUALS AND RESERVES.
5.13.1 Classification of Assets and Maintenance of Reserves.
Eldorado agrees that, at all times prior to the Effective Time, Eldorado shall
classify its assets and adjust its loan loss, OREO reserves and tax reserves in
a manner consistent with (a) its policies and practices in effect as of
September 30, 1996, and (b) any requirement of a Bank Regulator, including those
imposed as a consequence of an examination of Eldorado by such regulator. CSBI
may from time to time, in its discretion, conduct a review of Eldorado's asset
classifications and the adequacy of Eldorado's allowance for loan and lease
losses, OREO reserves and tax reserves. If, in the reasonable judgment of CSBI
based the foregoing classification and reserve standards, any assets should be
reclassified or any of such reserves should be increased, CSBI may propose such
reclassification or increase to Eldorado; provided, however, that any such
proposal shall be delivered to Eldorado on or before the fifth Business Day
following the Federal Reserve Bank's acceptance of CSBI's application filed
therewith. If and to the extent that Eldorado agrees with such proposed
reclassification or increase, Eldorado shall effect the same on its books and
records. If and to the extent that Eldorado refuses to effect one or more
proposed
43
44
reclassifications or increases, CSBI may, in its discretion, refer such matter
for review and determination by an Impartial Arbiter, the fees and expenses of
which shall be borne equally by the Parties. The Impartial Arbiter's
determination shall be made based on prevailing standards in the commercial
banking industry. The Impartial Arbiter shall not be constrained to adopt the
position of either Party with respect to any matter presented to it and shall be
free to classify any asset at any intermediate classification, and adjust any
reserve at any intermediate amount, in its sole judgment; provided, however,
that the Impartial Arbiter shall not adopt a position on any matter referred to
it outside the range bounded by the positions of the Parties. The determination
by the Impartial Arbiter shall be final and binding on both Parties.
Notwithstanding anything to the contrary contained herein, Eldorado may, in its
discretion, defer any reclassification of an asset or increase in a reserve
determined to be appropriate pursuant to this Section 5.13.1 until immediately
prior to (and conditioned upon the occurrence of) the Closing, but any such
reclassification or increase shall be considered to be effective for purposes of
determining Eldorado's satisfaction of the provisions of Section 6.2.2 as that
section applies to Section 3.12. Nothing in this Section 5.13.1 shall derogate
from CSBI's right to obtain information from and regarding Eldorado throughout
the period from the date hereof through the Effective Time.
5.13.2 Certain Other Pre-Closing Adjustments.
(a) Subject to subsection (c) of this Section 5.13.2, prior to
the Effective Time, Eldorado and CSBI shall review Eldorado's loan, OREO,
accrual and reserve policies and practices (including loan classifications and
levels of tax, loan and OREO reserves and accruals) and, to the extent
determined necessary or advisable by CSBI in its sole discretion, and consistent
in all events with GAAP and the accounting rules, regulations and
interpretations of the SEC, modify and change such policies and practices to (i)
reflect CSBI's plans with respect to the conduct of Eldorado's business
following the Merger, and (ii) make adequate provision for the costs and
expenses relating thereto so as to be applied consistently on a satisfactory
basis with those of CSBI.
(b) Subject to subsection (c) of this Section 5.13.2, Eldorado
agrees that, prior to the Effective Time, Eldorado shall adjust its loan loss
and OREO reserves as CSBI may determine, consistent with GAAP and the accounting
rules, regulations and interpretations of the SEC but in CSBI's sole discretion,
is appropriate in light of the then-anticipated post-closing grading,
classification or disposition of the relevant Eldorado assets.
(c) Eldorado's obligations to implement the changes described
in this Section 5.13.2 are conditioned upon (i) prior written notice from CSBI
that all conditions to CSBI's obligations to consummate the Merger provided
herein (other than deliveries to be made at the Closing) have been satisfied or
waived, (ii) the reasonable determination by Eldorado that all
44
45
conditions to Eldorado's obligations to consummate the Merger provided herein
(other than deliveries to be made at the Closing) have been satisfied or waived,
(iii) receipt of written confirmation from CSBI that CSBI has, either directly
or in one or more escrow accounts, cash equal to the aggregate Merger
Consideration (less any Redemption to be furnished by Eldorado), and (iv) the
absence of any reasonable basis for Eldorado to expect that the Merger will not
be consummated.
(d) No accruals or reserves required solely by this Section
5.13.2 shall be considered in determining Eldorado's satisfaction of the
provisions of Section 6.2.1 as that section applies to Section 3.12.
5.14 STOCK OPTION AGREEMENT. Eldorado agrees that, as a condition of and
as an inducement to CSBI to enter into this Agreement, Eldorado will enter into
a Stock Option Agreement, in the form attached as Exhibit 5.14 and dated of even
date herewith, immediately upon the execution and delivery of this Agreement.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF BOTH PARTIES. The obligations of CSBI,
Merger Sub and Eldorado to consummate the Merger are subject to the satisfaction
of each of the following conditions:
6.1.1 Approval by Eldorado's Shareholders. The Merger shall have
been approved by the affirmative vote of the holders of a majority of all shares
of Common Stock entitled to vote thereon.
6.1.2 Regulatory Approvals. All approvals of any Governmental
Entity required for the consummation of the Merger (including the Eldorado
Governmental Approvals and the CSBI Governmental Approvals but expressly
excluding any approval required for the Bank to dividend funds to Eldorado
Bancorp for purposes of funding the Redemption) shall have been obtained and
shall remain in full force and effect; all statutory or other required waiting
periods in respect thereof shall have expired; and no approval of any
Governmental Entity shall have imposed any condition or requirement which, in
the reasonable opinion of CSBI, would so materially adversely affect the
economic or business benefits of the Merger to CSBI so as to render inadvisable
the consummation thereof; provided, however, that a failure to obtain any
required approval of a Redemption by Eldorado or of a dividend from the Bank to
Eldorado Bancorp to fund a Redemption shall in no event constitute a failure of
this condition.
45
46
6.1.3 No Pending or Threatened Claims. There shall be no claim,
action, suit, investigation or other proceeding pending or overtly threatened
before any court or other Governmental Entity that presents a substantial risk
of restraint or prohibition of the Merger or the obtaining of material damages
from Eldorado, CSBI or Merger Sub or their respective officers or directors in
connection therewith; and no such restraint or prohibition shall be effective as
of the Closing, whether or not the action in which the same was entered shall
remain pending.
6.2 CONDITIONS TO THE OBLIGATIONS OF CSBI AND MERGER SUB. The
obligations of Merger Sub to consummate the Merger, and of CSBI to cause Merger
Sub to consummate the Merger, are further subject to the satisfaction of, or
CSBI's written waiver of, each of the following conditions:
6.2.1 Accuracy of Representations and Warranties When Made.
Eldorado's representations and warranties contained in this Agreement shall have
been true and correct as of the dates when made (except with respect to events
and conditions waived by CSBI pursuant to Section 5.5), except to the extent
that (without giving effect to any qualifications contained therein relating to
"materiality" or the absence of a "Material Adverse Effect") the event or
development rendering such representation or warranty untrue, individually or in
the aggregate with all other events or developments rendering that or any other
representation or warranty untrue, shall not have resulted in or constitute, and
could not reasonably be expected to result in or constitute, a Material Adverse
Effect on Eldorado or on Eldorado's ability to consummate the Merger.
6.2.2 Bringdown of Representations and Warranties at Closing.
Eldorado's representations and warranties contained in this Agreement shall
remain true and correct as of the Closing as though made at and as of the
Closing (excepting only representations and warranties which speak (other than
in the preamble to Article III) expressly as of an earlier specified date and
except with respect to events and conditions waived by CSBI pursuant to Section
5.5), except to the extent that (without giving effect to any qualifications
contained therein relating to "materiality" or the absence of a "Material
Adverse Effect") the event or development rendering such representation or
warranty untrue, individually or in the aggregate with all other events or
developments rendering that or any other representation or warranty untrue,
shall not have resulted in or constitute, and could not reasonably be expected
to result in or constitute, a Material Adverse Effect on Eldorado or on
Eldorado's ability to consummate the Merger.
6.2.3 Compliance with Covenants. Eldorado shall have performed,
satisfied and complied with, in all material respects, each of its agreements
and covenants contained in Articles II and V and elsewhere in this Agreement,
unless the failure to perform, satisfy or
46
47
comply relates to an immaterial obligation that, taken together with all other
such failures, does not constitute a material failure by Eldorado to perform its
obligations hereunder.
6.2.4 Securities Outstanding. There shall be no shares of Common
Stock or other Eldorado securities issued and outstanding as of the Effective
Time other than (a) the 3,787,734 shares issued and outstanding as of the date
hereof, and (b) any shares issued upon the exercise of Options subsequent to the
date hereof, which exercise has been in accordance with the terms of the
applicable Option as in effect on the date hereof.
6.2.5 Cancellation of Options. All Options outstanding as of the
date hereof (other than Excluded Options, as to which CSBI's obligations are not
conditioned) shall have been cancelled prior to the Effective Time. The number
of Options for which Eldorado shall have paid (or shall be liable to pay)
consideration to so cancel (whether or not equal to the Option Cancellation
Payment) shall have related to not more than an aggregate of 314,233 shares of
Common Stock less the number of shares (if any) issued as described in clause
(b) of Section 6.2.3 and less the number of shares subject to Excluded Options,
and Eldorado shall not have paid (or become liable to pay) more than the
applicable Option Cancellation Payment for the cancellation of any such Option.
As of the Effective Time, there shall be outstanding or in force and effect no
Option (other than Excluded Options, as to which CSBI's obligations are not
conditioned) or other option, warrant, call, right or agreement that obligates
Eldorado to issue, deliver or sell, or cause to be issued, delivered or sold,
any share of capital stock or other securities of Eldorado, or that obligates
Eldorado to grant, extend or enter into any such option, warrant, call, right or
agreement.
6.2.6 Dissenting Shares. The aggregate number of shares of Common
Stock owned by Persons who have made a demand for purchase under Section 1301 of
the Corporations Code shall constitute less than 15.0% of all shares of Common
Stock outstanding as of the date of the meeting of Shareholders called for the
purpose of voting on the Merger.
6.2.7 Third Party Consents. The consent, approval or waiver of
each Person (other than the Governmental Entities referred to in Section 6.1.2)
whose consent, approval or waiver shall be required in order to permit the
consummation of the Merger or the preservation of the contractual rights of
Eldorado with respect to its business shall have been obtained, except where the
failure to obtain such consent, approval or waiver would not have a Material
Adverse Effect on the economic or business benefits to CSBI of the Merger so as
to render inadvisable the consummation of the Merger in the reasonable judgment
of CSBI.
6.2.8 Receipt of Legal Opinion. CSBI shall have received a legal
opinion from Stradling, Yocca, Xxxxxxx & Xxxxx, counsel for Eldorado, addressed
to CSBI and Merger Sub
47
48
and dated the Closing Date, in form and substance reasonably satisfactory to
CSBI, opining to the matters set forth on Exhibit 6.2.8, subject to customary
assumptions and qualifications.
6.2.9 Auditors' Opinion and Report. KPMG Peat Marwick LLP shall
have (a) rendered an unqualified opinion with respect to Eldorado's financial
statements as at December 31, 1996 and for year then ended following its audit
of such financial statements, and (b) delivered to Eldorado a letter indicating
that such firm has reviewed the books, records and internal accounting
statements and accounting procedures of Eldorado and setting forth such firm's
conclusions regarding the adequacy of Eldorado's internal control procedures,
and Eldorado shall have furnished a copy of such letter to CSBI.
6.2.10 Receipt of Officers' Certificates. Eldorado shall have
delivered to CSBI and Merger Sub (a) a certificate, executed by the Chief
Executive Officer and Chief Financial Officer of Eldorado and dated as of the
Closing Date, certifying to the fulfillment of the conditions specified in
Section 6.1 (with regard to Eldorado only) and Section 6.2, including a
certification that each representation or warranty contained in Article III is
true and correct as of the Closing Date (or, if such certification cannot be
made, specifying the exceptions thereto), excepting only representations and
warranties which speak expressly as of an earlier specified date and matters
previously disclosed in Disclosure Schedules or Disclosure Supplements, and (b)
a certificate, executed by the Chief Financial Officer of Eldorado and dated as
of not more than three (3) Business Days prior to the Closing Date, containing,
and certifying to the accuracy of, the same information required to be included
on Part A of Schedule 3.10 had such Schedule been delivered as of the date of
such certificate.
6.2.11 Documents and Instruments in Satisfactory Form. All
corporate and other proceedings in connection with this Agreement and with the
Merger and all documents and instruments incidental to the Merger shall be
reasonably satisfactory in substance and form to CSBI and its counsel, and CSBI
and its counsel shall have received all such counterpart originals or certified
or other copies of such documents as they may reasonably request.
6.2.12 Receipt of Funds from Eldorado. The Exchange Agent shall
have received from Eldorado the amount, if any, to be funded by Eldorado
pursuant to Section 2.3.3.
6.3 CONDITIONS TO THE OBLIGATIONS OF ELDORADO. The obligations of
Eldorado to consummate the Merger are further subject to the satisfaction of, or
Eldorado's written waiver of, each of the following conditions:
6.3.1 Compliance with Covenants. CSBI shall have performed,
satisfied and complied with, in all material respects, each of its agreements
and covenants contained in Articles II and V and elsewhere in this Agreement,
unless the failure to perform, satisfy or
48
49
comply relates to an immaterial obligation that, taken together with all other
such failures, does not constitute a material failure by CSBI to perform its
obligations hereunder.
6.3.2 Receipt of Legal Opinion. Eldorado shall have received a
legal opinion from Xxxxxx, XxXxxxxxx & Fish, LLP, counsel for CSBI and Merger
Sub, addressed to Eldorado and dated the Closing Date, in form and substance
reasonably satisfactory to Eldorado, opining to the matters set forth on Exhibit
6.3.2, subject to customary assumptions and qualifications.
6.3.3 Receipt of Officers' Certificate. Eldorado shall have
received from each of CSBI and Merger Sub a certificate, executed by
respectively, the President and Chief Financial Officer of CSBI and the
President and Chief Financial Officer of Merger Sub and dated as of the Closing
Date, certifying to the fulfillment of the conditions specified in Section 6.1
(with regard to CSBI and Merger Sub only) and Section 6.3, including a
certification that each representation or warranty contained in Article IV is
true and correct as of the Closing Date (or, if such certification cannot be
made, specifying the exceptions thereto), excepting only representations and
warranties which speak expressly as of an earlier specified date.
6.3.4 Documents and Instruments in Satisfactory Form. All
corporate and other proceedings in connection with this Agreement and with the
Merger and all documents and instruments incidental to the Merger shall be
reasonably satisfactory in substance and form to Eldorado and its counsel, and
Eldorado and its counsel shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
6.3.5 Receipt of Purchase Price. The Exchange Agent shall have
received from CSBI funds adequate to pay the aggregate of all amounts required
to be paid to holders of Common Stock pursuant to Section 2.3.1, less the amount
of the Deposit delivered by the Deposit Escrow Agent and the amount (if any) to
be funded by Eldorado pursuant to Section 2.3.3.
6.3.6 Payment of Option Cancellation Payments. The Option
Cancellation Payments shall have been made prior to the Closing, or procedures
reasonably acceptable to Eldorado shall have been adopted for the payment of the
Option Cancellation Payments promptly following the Effective Time.
49
50
ARTICLE VII
TERMINATION; TERMINATION FEE
This Agreement may be terminated, and the Merger abandoned, prior to
the Closing solely by the following means and with the following effects:
7.1 BY MUTUAL AGREEMENT. Eldorado and CSBI (on behalf of itself and
Merger Sub) may terminate this Agreement by mutual written consent at any time.
7.2 REGULATORY IMPEDIMENT. Either CSBI (on behalf of itself and Merger
Sub) or Eldorado may unilaterally terminate this Agreement at any time prior to
the Closing if (a) a Bank Regulator shall have made a final determination
denying an application of either Party the granting of which is essential to the
consummation of the Merger, or (b) the occurrence of the Closing would violate
any final order, decree or judgment of any court having competent jurisdiction,
provided, that CSBI shall reimburse Eldorado for Eldorado's reasonable and
documented Expenses, not to exceed $400,000, unless the basis for such
termination is (x) a Bank Regulator's denial of an application on the basis of
matters associated predominantly with Eldorado's condition, regulatory
compliance or similar matters, or (y) an order, decree or judgment entered in an
action brought principally (i) against Eldorado, (ii) based on actions (or
failures to act) by Eldorado, or (iii) based on an agreement to which Eldorado
is a party or by which any of Eldorado's assets are bound.
7.3 BY CSBI. CSBI (on behalf of itself and Merger Sub) may unilaterally
terminate this Agreement:
7.3.1 if Eldorado has breached any representation or warranty
contained in this Agreement and such breach is of a nature that would, in the
reasonable determination of CSBI, cause the failure of the condition set forth
in Section 6.2.1, or if Eldorado has failed to perform, satisfy or comply with
any of its agreements and covenants contained in this Agreement (other than as
described in Section 7.3.2) and such failure is of a nature that would, in the
reasonable determination of CSBI, cause the failure of the condition set forth
in Section 6.2.3, in either case such termination to take effect ten (10)
Business Days following notice to Eldorado identifying such breach or failure if
such breach or failure has not been cured prior to the expiration of such
period;
7.3.2 upon notice to Eldorado given within the period provided
therefor in Section 5.1.4 if (a) Eldorado has not reaffirmed its intent to
proceed with the Merger within the time provided therefor in Section 5.1.4
following its receipt of a Qualifying Strategic Transaction Proposal, or (b) the
Board of Directors fails to give its Recommendation of Approval to the
Shareholders, or withdraws its Recommendation of Approval prior to the
affirmative vote of the
50
51
Shareholders, whether or not such failure or withdrawal is permitted under
Section 5.2.2, provided that in the case of a termination under this Section
7.3.2, CSBI shall be entitled to receive from Eldorado the Termination Fee;
7.3.3 upon notice to Eldorado, if any of the conditions to the
obligations of CSBI contained in Section 6.2 has not been satisfied as of the
Closing Date or if, in the reasonable determination of CSBI, a matter disclosed
by Eldorado pursuant to Section 5.5 (or otherwise coming to the attention of
CSBI at any time hereafter) will prevent Eldorado from satisfying the conditions
set forth in Section 6.2.1 or Section 6.2.2 as of the Closing;
7.3.4 upon notice to Eldorado at any time after 12:00 noon
(Pacific time) on August 1, 1997, if the Closing shall not have occurred prior
to such date and time, unless (a) such failure results primarily from CSBI
breaching any of its representations, warranties, covenants or agreements
contained in this Agreement or (b) all affirmative approvals of Governmental
Entities that are necessary to the consummation of the Merger have been obtained
and the Parties are in the so-called "waiting period" relating to Department of
Justice review, provided, that (x) if the basis for such termination is the
failure of the Shareholders to approve the Merger, Eldorado shall reimburse CSBI
for CSBI's reasonable and documented Expenses, not to exceed $400,000, and (y)
if the basis for such termination is the failure to obtain those approvals of
Governmental Entities required under Section 6.1.2, a condition to the
effectiveness of such termination is CSBI's reimbursement of Eldorado's
reasonable and documented Expenses, not to exceed $400,000.
7.4 BY ELDORADO. Eldorado may unilaterally terminate this Agreement:
7.4.1 if CSBI has failed to perform, satisfy or comply with in
any material respect any of its agreements and covenants contained in this
Agreement (including a failure timely to furnish assurances of continued
availability of the Merger Financing and/or evidence of Merger Financing as
provided in Section 5.12.3, including as such Section incorporates Section
5.12.2 regarding the Remaining Financing Commitments), such termination to take
effect (a) if such failure is with respect to Section 5.12.3, at the end of the
period set forth in such Section, and (b) if such failure is with respect to any
other Section, ten (10) Business Days following notice to CSBI identifying such
breach or failure if such breach or failure has not been cured prior to the
expiration of such period;
7.4.2 upon notice to CSBI if Eldorado has received a Qualifying
Strategic Transaction Proposal; provided, however, that a condition to the
effectiveness of any termination pursuant to this Section 7.4.2 is the payment
of the Termination Fee to CSBI by Eldorado;
51
52
7.4.3 upon notice to CSBI if the Shareholders fail to approve the
Merger by the requisite votes required by Law at a Shareholders Meeting;
provided, however, that a condition to the effectiveness of any termination
pursuant to this Section 7.4.3 is Eldorado's payment of CSBI's reasonable and
documented Expenses, not to exceed $400,000, unless CSBI shall have voted any
shares of Common Stock with respect to which CSBI holds proxies or powers of
attorney against the approval of the Merger; and provided further that Eldorado
may not terminate the Agreement pursuant to this Section 7.4.3 if prior to the
meeting of Shareholders the Board of Directors has not given, or has given but
withdrawn, its Recommendation of Approval;
7.4.4 upon notice to CSBI if any of the conditions to the
obligations of Eldorado contained in Section 6.3 has not been satisfied as of
the Closing Date; or
7.4.5 upon notice to CSBI after 12:00 noon (Pacific time) on
August 1, 1997, if the Closing shall not have occurred prior to such date and
time, unless (a) the failure results primarily from Eldorado breaching any of
its representations, warranties, covenants or agreements contained in this
Agreement or (b) all affirmative approvals of Governmental Entities that are
necessary to the consummation of the Merger have been obtained and the Parties
are in the so-called "waiting period" relating to Department of Justice review;
provided, however, that (x) if the basis for such termination is the failure of
the Shareholders to approve the Merger, a condition to the effectiveness of such
termination is Eldorado's payment of CSBI's reasonable and documented Expenses,
not to exceed $400,000, and (y) if the basis for such termination is the failure
to obtain those approvals of Governmental Entities required under Section 6.1.2,
CSBI shall reimburse Eldorado for Eldorado's reasonable and documented Expenses,
not to exceed $400,000.
7.5 TERMINATION FEE; DEPOSIT.
7.5.1 Termination Fee. The "Termination Fee" means Three Million
Five Hundred Thousand Dollars ($3,500,000), in same day funds.
7.5.2 Disposition of Deposit. In the event this Agreement is
terminated by Eldorado on any basis other than pursuant to Section 7.2, Section
7.4.2, Section 7.4.3 or Section 7.4.5, the Deposit shall be disbursed to
Eldorado in accordance with the Deposit Escrow Agreement. In the event this
Agreement is terminated and Eldorado is not entitled to receive the Deposit in
accordance with the immediately preceding sentence, CSBI shall be entitled to
the return of the Deposit from the Deposit Escrow Agent.
7.6 EFFECT OF TERMINATION; REMEDIES.
52
53
7.6.1 General. In the event this Agreement is terminated pursuant
to this Article VII, this Agreement shall become void and of no effect and
neither Party shall have any liabilities or other obligations whatsoever
hereunder, except that (a) the provisions of Section 5.3 relating to
Confidential Information, Article VII and Section 8.2 shall survive such
termination, and (b) notwithstanding anything else to the contrary contained
herein, but subject in all events to the immediately following sentence, neither
Party shall be relieved of or released from any liability or damages arising out
of its breach of any provision of this Agreement prior to such termination. In
the event that either Party has breached this Agreement by the inaccuracy, as of
the date when made, of a representation or warranty made herein by such Party,
such Party shall not be liable to the other Party for damages unless (i) one or
more of the breaching Party's officers identified in the definition of
"Eldorado's Knowledge" or "CSBI's Knowledge", as applicable, knew or reasonably
should have known of such inaccuracy as of the date of this Agreement, and (ii)
the facts causing such inaccuracy, individually or in the aggregate with all
other facts causing other representations or warranties to be inaccurate, shall
not have resulted in or constitute, and could not reasonably be expected to
result in or constitute, in the case of Eldorado, a Material Adverse Effect on
Eldorado, prior to or after the Merger (and assuming for purposes of this clause
that the Merger Sub has no assets, liabilities or operations), or on Eldorado's
ability to consummate the Merger, and in the case of CSBI, a Material Adverse
Effect on CSBI's ability to consummate the Merger.
7.6.2 Remedies Cumulative Generally. Except as provided in
Section 7.6.3, no remedy made available by any of the provisions of this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity.
7.6.3 Certain Remedies Exclusive.
(a) If this Agreement is properly terminated under Section
7.3.2 or 7.4.2 and Eldorado pays to CSBI the Termination Fee (i) within three
Business Days of the notice of termination, in the case of Section 7.4.2, or
(ii) within ten Business Days of the notice of termination, in the case of
Section 7.3.2, then CSBI's receipt and acceptance of the Termination Fee shall
constitute an exclusive remedy, and following such receipt and acceptance CSBI
shall be barred from recovering damages for any breach of any term of this
Agreement or from seeking any other remedy at law or in equity from Eldorado,
the Bank or any of the Indemnified Parties (other than with respect to such
Persons' compliance with the provisions of Section 5.3 relating to Confidential
Information).
(b) If (i) this Agreement is properly terminated under Section
7.4.3, or under Section 7.3.4 or Section 7.4.5 on the basis of the Shareholders'
failure to approve the Merger, (ii) CSBI has not asserted a breach of this
Agreement by Eldorado at or before the time CSBI
53
54
delivers to Eldorado its invoice for reimbursement of Expenses pursuant to such
Section, and (iii) Eldorado reimburses CSBI's Expenses (subject to the cap
specified in such Section) within ten (10) Business Days after Eldorado's
receipt of the invoice therefor (which period shall be extended by an additional
reasonable time if Eldorado has reasonably disputed the amount of such
obligations), then CSBI's timely receipt of such reimbursement shall constitute
an exclusive remedy except as provided in Section 7.5.2, and following such
receipt and acceptance CSBI shall be barred from recovering damages for any
breach of any term of this Agreement or from seeking any other remedy at law or
in equity from Eldorado, the Bank or any of the Indemnified Parties (other than
with respect to such Persons' compliance with the provisions of Section 5.3
relating to Confidential Information).
(c) If this Agreement is terminated under provisions that
entitle Eldorado to receive and retain the Deposit, and the Deposit is so
disbursed to Eldorado in accordance with the Deposit Escrow Agreement without
challenge to such disbursement by CSBI, then Eldorado's receipt and acceptance
of the Deposit shall constitute an exclusive remedy, and following such receipt
and acceptance Eldorado shall be barred from recovering damages for any breach
of any term of this Agreement or from seeking any other remedy at law or in
equity from CSBI or any of its affiliates or investors (other than with respect
to such Persons' compliance with the provisions of Section 5.3 relating to
Confidential Information).
ARTICLE VIII
MISCELLANEOUS
8.1 CLOSING. Unless the Parties shall mutually fix another date, the
Closing Date shall be that date (or the next subsequent Tuesday, Wednesday or
Thursday that is a Business Day) that is five Business Days following the latest
to occur of the conditions set forth in Section 6.1. Subject to the fulfillment
or waiver of those conditions and the other conditions set forth in Article VI,
the Closing of the Merger shall take place at the offices of Eldorado's counsel
in Newport Beach, California, at 10:00 a.m. (local time) on the Closing Date.
Except as otherwise provided herein, all proceedings to be taken and all
documents to be executed at the Closing shall be deemed to have been taken,
delivered and executed simultaneously as of the Effective Time, and no
proceeding shall be deemed taken nor documents deemed executed or delivered
until all have been taken, delivered and executed.
8.2 EXPENSES. Except as expressly provided in Sections 7.3 and 7.4 with
respect to reimbursement of CSBI's Expenses under certain circumstances, each
Party shall be responsible for its own Expenses.
54
55
8.3 PUBLICITY. Promptly following the execution and delivery of this
Agreement, Eldorado and CSBI shall issue a joint press release in a form
mutually to be agreed upon. Eldorado and CSBI shall not, and shall instruct
their Representatives not to, issue or cause the publication of any press
release or other public announcement with respect to, or otherwise make any
public statement concerning, this Agreement or the Merger without the consent of
the other Party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, in the event that any Party determines, based
upon the advice of counsel, that a press release, disclosure in a public filing,
or other public disclosure of or reference to this Agreement, the Merger or the
other Party is required by Law, the former Party shall first notify the latter
Party of the potential disclosure, afford the latter Party a reasonable
opportunity to review and comment on the proposed disclosure, and obtain the
latter Party's approval of such disclosure, which approval shall not be withheld
or delayed in any manner that is unreasonable under the circumstances.
8.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission
(with confirmation) or on the next business day after dispatch by an overnight
courier of national reputation to the respective Parties as follows:
If to CSBI or Merger Sub, to it at:
Commerce Security Bancorp, Inc.
0000 Xxxxxx Xxxxx
Xxxxxxxxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, President & CEO
fax: (000) 000-0000
with a copy to:
Xxxxxx, XxXxxxxxx & Fish, LLP
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esquire
Xxxx X. X'Xxxxxx, Esquire
fax: (000) 000-0000
55
56
If to Eldorado, to it at:
Eldorado Bancorp
00000 Xxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: X.X. Xxxxxxx, President & CEO
fax: (000) 000-0000
with a copy to:
Stradling, Yocca, Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000-0000
Attention: C. Xxxxx Xxxxxxx, Esquire
fax: 000-000-0000
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
8.5 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the Parties and, supersedes all prior agreements, understandings,
negotiations and discussions, both written and oral, among the Parties with
respect to the subject matter hereof.
8.6 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations, warranties, covenants and agreements contained herein or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time except those covenants and agreements that by their express terms apply in
whole or in part to periods after the Effective Time.
8.7 BENEFITS; BINDING EFFECT; ASSIGNMENT AND DESIGNATION. This Agreement
shall be for the benefit of and binding upon the Parties, their respective
successors and, where applicable, assigns. No Party may assign this Agreement or
any of its rights, interests or obligations hereunder without the prior written
consent of the other Party. Notwithstanding any assignment or delegation of any
Party's rights, interests or obligations, each Party shall nonetheless remain
responsible for the performance of all of its obligations provided hereunder.
8.8 WAIVER. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly so provided.
56
57
8.9 NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any Person
other than the Parties and their respective successors and permitted assigns any
rights or remedies under or by reason of this Agreement.
8.10 SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses, Sections or Articles contained in this Agreement
shall not affect the enforceability of the remaining portions of the Agreement
or any part hereof, all of which are inserted conditionally on their being valid
in law. In the event any one or more of the words, phrases, sentences, clauses,
sections or subsections contained in this Agreement shall be declared invalid,
this Agreement shall be construed as if such invalid word(s), phrase(s),
sentence(s), clause(s), section(s), or subsection(s), had not been inserted;
provided, however, that if any provision is declared to be unenforceable because
it is determined to be overbroad, then, to the extent possible, in lieu of
deletion such provision shall be modified to the minimum extent necessary to
render such provision enforceable.
8.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the several Parties in separate counterparts, each of which
shall be deemed to be one and the same instrument.
8.12 APPLICABLE LAW; CONSENT TO JURISDICTION. THIS AGREEMENT AND ALL
RIGHTS OF THE PARTIES RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE
GOVERNED BY THE LAWS OF THE UNITED STATES AND THE INTERNAL LAW OF THE STATE OF
CALIFORNIA (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF), AND ALL
QUESTIONS CONCERNING THE VALIDITY AND CONSTRUCTION THEREOF SHALL BE DETERMINED
IN ACCORDANCE WITH THE LAWS OF SAID STATE. EACH PARTY HEREBY IRREVOCABLY SUBMITS
TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS SITTING IN THE
COUNTY OF ORANGE, STATE OF CALIFORNIA IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT AND HEREBY IRREVOCABLY AGREES, ON BEHALF OF ITSELF
AND ON BEHALF OF SUCH PARTY'S SUCCESSORS AND PERMITTED ASSIGNS, THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION SUCH PERSON MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
57
58
8.13 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY
IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT, THE RELATED DOCUMENTS OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
[The rest of this page is intentionally left blank.]
58
59
IN WITNESS WHEREOF, the Parties have each executed and delivered this
Agreement as of the day and year first above written.
COMMERCE SECURITY BANCORP, INC.
ATTEST:
By: /s/ Xxxxxx Xxxxxx
----------------------- ------------------------------------
Secretary President & Chief Executive Officer
ELDORADO BANCORP
ATTEST:
By: /s/ X.X. Xxxxxxx
----------------------- ------------------------------------
Secretary President & Chief Executive Officer
59
60
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER................................................................................... -1-
ARTICLE I Definitions and Rules of Construction............................................................. -1-
1.1 Definitions.................................................................................. -1-
1.2 Rules of Construction........................................................................ -7-
ARTICLE II The Merger........................................................................................ -7-
2.1 The Merger................................................................................... -7-
2.2 Corporate Documents, Directors and Officers.................................................. -7-
2.3 Treatment of Common Stock and Merger Sub Stock............................................... -8-
2.3.1 Conversion of Common Stock............................................................. -8-
2.3.2 Dissenting Shares...................................................................... -8-
2.3.3 Payment to Exchange Agent.............................................................. -8-
2.3.4 Conversion of Merger Sub Stock......................................................... -9-
2.4 Exchange of Certificates..................................................................... -9-
2.4.1 Common Stock Exchange Procedures....................................................... -9-
2.4.2 Certain Taxes.......................................................................... 9-
2.4.3 Lost, Stolen or Destroyed Certificates................................................. -10-
2.4.4 Unclaimed Monies....................................................................... -10-
2.5 Treatment of Options......................................................................... -10-
2.6 Closing of Transfer Books.................................................................... -10-
ARTICLE III Representations and Warranties of Eldorado........................................................ -11-
3.1 Organization, Standing and Power............................................................. -11-
3.2 Capital Structure............................................................................ -11-
3.2.1 Capital Stock of Eldorado.............................................................. -11-
3.2.2 Capital Structure of Bank.............................................................. -12-
3.2.3 Other Securities....................................................................... -12-
3.3 Interests in Other Entities.................................................................. -13-
3.4 Authority and Related Matters................................................................ -13-
3.5 Agreements with Certain Persons Regarding Merger............................................. -13-
3.6 Conflicts.................................................................................... -13-
3.7 Consents..................................................................................... -14-
3.8 Securities Filings and Financial Statements.................................................. -14-
3.9 Regulatory Filings and Agreements............................................................ -15-
3.10 Undisclosed Liabilities...................................................................... -15-
3.11 Criticized Assets, Reserves and Certain Other Assets......................................... -16-
3.12 Investment Securities; Derivatives........................................................... -16-
3.13 Absence of Certain Changes or Events......................................................... -16-
3.14 Compliance with Applicable Laws.............................................................. -17-
3.15 Litigation and Other Disputes................................................................ -17-
3.16 Administration of Fiduciary Accounts......................................................... -17-
3.17 Taxes........................................................................................ -18-
3.18 Certain Agreements........................................................................... -18-
3.19 Employees and Employee Benefit Plans......................................................... -19-
3.20 Properties................................................................................... -20-
3.21 Environmental................................................................................ -20-
3.22 Intellectual Property........................................................................ -21-
3.23 Brokers...................................................................................... -21-
3.24 Fairness Opinion............................................................................. -21-
3.25 Disclosure of All Material Matters........................................................... -21-
(i)
61
ARTICLE IV Representations and Warranties of CSBI and Merger Sub.............................................. -22-
4.1 Organization, Standing and Power............................................................. -22-
4.2 Authority and Related Matters................................................................ -22-
4.3 No Conflicts................................................................................. -22-
4.4 Consents..................................................................................... -22-
4.5 Brokers...................................................................................... -23-
4.6 Financial Capacity........................................................................... -23-
ARTICLE V Additional Agreements.............................................................................. -23-
5.1 Discussions with Third Parties............................................................... -23-
5.2 Proxy Statement; Shareholder Meeting......................................................... -24-
5.3 Access....................................................................................... -25-
5.4 Cooperation.................................................................................. -26-
5.5 Advice of Changes............................................................................ -27-
5.6 Current Information.......................................................................... -27-
5.7 Interim and Annual Financial Statements...................................................... -27-
5.8 Conduct of Business by Eldorado.............................................................. -28-
5.9 Certain Operating Covenants.................................................................. -28-
5.10 Prosecution of Regulatory Filings............................................................ -31-
5.11 Covenants Regarding Employees, Directors and Officers........................................ -31-
5.11.1 Employee Benefit Plans............................................................... -31-
5.11.2 Indemnification; Directors' and Officers' Insurance.................................. -31-
ARTICLE VI Conditions to Closing.............................................................................. -33-
6.1 Conditions to Obligations of Both Parties.................................................... -33-
6.1.1 Approval by Eldorado's Shareholders.................................................... -33-
6.1.2 Regulatory Approvals................................................................... -33-
6.1.3 No Pending or Threatened Claims........................................................ -33-
6.2 Conditions to the Obligations of CSBI and Merger Sub......................................... -34-
6.2.1 Accuracy of Representations and Warranties; Compliance with Covenants.................. -34-
6.2.2 Bringdown of Representations and Warranties............................................ -34-
6.2.3 Securities Outstanding................................................................. -34-
6.2.4 Cancellation of Options................................................................ -34-
6.2.5 Dissenting Shares...................................................................... -35-
6.2.6 Securities Law Compliance.............................................................. -35-
6.2.7 Third Party Consents................................................................... -35-
6.2.8 Receipt of Legal Opinion............................................................... -35-
6.2.9 Auditors' Opinion and Report........................................................... -35-
6.2.10 Receipt of Officers' Certificates.................................................... -35-
6.2.11 Documents and Instruments in Satisfactory Form....................................... -36-
6.2.12 Receipt of Funds from Eldorado....................................................... -36-
6.3 Conditions to the Obligations of Eldorado.................................................... -36-
6.3.1 Accuracy of Representations and Warranties; Compliance with Covenants.................. -36-
6.3.2 Bringdown of Representations and Warranties............................................ -36-
6.3.3 Receipt of Legal Opinion............................................................... -36-
6.3.4 Receipt of Officers' Certificate....................................................... -36-
6.3.5 Documents and Instruments in Satisfactory Form......................................... -37-
6.3.6 Receipt of Purchase Price.............................................................. -37-
ARTICLE VII Termination; Termination Fee....................................................................... -37-
7.1 By Mutual Agreement.......................................................................... -37-
7.2 Regulatory Impediment........................................................................ -37-
(ii)
62
7.3 By CSBI...................................................................................... -37-
7.4 By Eldorado.................................................................................. -38-
7.5 Termination Fee.............................................................................. -39-
7.5.1 Amount of Termination Fee.............................................................. -39-
7.5.2 Additional Agreement Regarding Termination Fee......................................... -39-
7.6 Effect of Termination; Remedies.............................................................. -39-
7.6.1 General................................................................................ -39-
7.6.2 Remedies Cumulative Generally.......................................................... -40-
7.6.3 Certain Remedies Exclusive............................................................. -40-
ARTICLE VIII Miscellaneous.................................................................................... -40-
8.1 Closing...................................................................................... -40-
8.2 Expenses..................................................................................... -41-
8.3 Publicity.................................................................................... -41-
8.4 Notices...................................................................................... -41-
8.5 Entire Agreement............................................................................. -42-
8.6 Non-Survival of Representations, Warranties and Agreements................................... -42-
8.7 Benefits; Binding Effect; Assignment and Designation......................................... -42-
8.8 Waiver....................................................................................... -42-
8.9 No Third Party Beneficiary................................................................... -43-
8.10 Severability................................................................................. -43-
8.11 Counterparts................................................................................. -43-
8.12 Applicable Law; Consent to Jurisdiction...................................................... -43-
8.13 Waiver of Jury Trial......................................................................... -44-
(iii)
63
FORM OF
AGREEMENT OF MERGER
This Agreement of Merger, dated as of , 1997 ("Merger Agreement") is
made and entered into by ______________, a _________ corporation ("Merger Sub"),
Eldorado Bancorp, a California corporation ("Eldorado"), (Merger Sub and
Eldorado being collectively referred to as the "Constituent Corporations") and
Commerce Security Bancorp, Inc., a Delaware corporation ("CSBI").
WITNESSETH:
WHEREAS, Eldorado and CSBI previously have entered into an Agreement
and Plan of Merger (the "Agreement and Plan of Merger") providing for certain
representations, warranties and agreements in connection with the transactions
contemplated; and
WHEREAS, the respective Boards of Directors of the Constituent
Corporations deem it advisable and in the best interests of the Constituent
Corporations and in the best interests of the respective shareholders of the
Constituent Corporations that Merger Sub merge (the "Merger") with and into
Eldorado.
NOW, THEREFORE, the Constituent Corporations and CSBI hereby agree as
follows:
ARTICLE I.
The Constituent Corporations
1.01 (a) Eldorado was organized under the laws of the State of
California on __________________.
(b) Eldorado is authorized to issue an aggregate of 12,500,000
shares of Common Stock and [5,000,000] shares of Preferred Stock.
(c) There are currently outstanding, and as of the date and time
immediately prior to the consummation of the Merger there will be outstanding,
an aggregate of 3,787,492 shares of Eldorado Common Stock (the "Eldorado Common
Stock") and no shares of Eldorado Preferred Stock.
1.02 (a) Merger Sub was incorporated under the laws of the State of
__________on ___________, 19__.
(b) Merger Sub is authorized to issue an aggregate of
_____________ shares of common stock ("Merger Sub Common Stock").
64
(c) There are currently outstanding, and as of the date and
time immediately prior to the consummation of the Merger there will be
outstanding, an aggregate of _____ shares of Merger Sub Common Stock, all of
which are owned by CSBI.
ARTICLE II.
The Merger
2.01 (a) This Merger Agreement has been approved by the shareholders of
Eldorado and the shareholder of Merger Sub, and if all of the conditions
precedent to the consummation of the Merger specified in the Agreement and Plan
of Reorganization shall have been satisfied or duly waived by the party entitled
to satisfaction thereof, then, unless terminated as provided in the Agreement
and Plan of Merger, this Merger Agreement, along with certificates meeting the
requirements of the California Corporations Code, shall be filed with the
Secretary of State of California [and a Certificate of Merger meeting the
requirements of the Delaware General Corporation Law shall be filed with the
Secretary of State of Delaware]. Upon such filings, the Merger shall become
effective at 12:01 a.m. Pacific [Standard] Time on __________________________,
1997 ("Effective Time of Merger").
(b) At the Effective Time of the Merger, Merger Sub shall be
merged into Eldorado and the separate corporate existence of Merger Sub shall
thereupon cease. Eldorado shall be the surviving entity in the Merger (the
"Surviving Entity") and the separate corporate existence of Eldorado, with all
of its purposes, objects, rights, privileges, powers, immunities and franchises,
shall continue unaffected and unimpaired by the Merger.
2.02 (a) The Surviving Entity shall succeed to all of the rights,
privileges, powers, immunities and franchises of Merger Sub, all of the
properties and assets of Merger Sub and all of the debts, choses in action and
other interests due or belonging to Merger Sub and shall be subject to, and
responsible for, all of the debts, liabilities and obligations of Merger Sub
with the effect set forth in the California Corporations Code [and the Delaware
General Corporation Law].
(b) If, at any time after the Effective Time of the Merger, the
Surviving Entity shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Entity its right, title or interest in, to or under any of the rights,
properties or assets of Merger Sub acquired or to be acquired by the Surviving
Entity as a result of, or in connection with, the Merger or to otherwise carry
out this Merger Agreement, the officers and directors of the Surviving Entity
shall and will be authorized to execute and deliver, in the name and on behalf
of the Constituent Corporations or otherwise, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of the
Constituent Corporations or otherwise, all such other actions and things as may
be necessary or desirable
2
65
to vest, perfect or confirm any and all right, title and interest in, to and
under such rights, properties or assets in the Surviving Entity or to otherwise
carry out this Merger Agreement.
ARTICLE III.
Manner and Basis Of Converting Shares
Of The Constituent Corporations
3.01 At the Effective Time of the Merger:
(a) Each share of Merger Sub Stock which is outstanding
immediately prior the Effective Time of the Merger shall be converted at the
Effective Time of the Merger into one share of Eldorado Common Stock.
(b) Each share of Eldorado Common Stock (except for shares, if
any, which shall then or thereafter constitute "dissenting shares" within the
meaning of Section 1300 of the California Corporations Code ("Dissenting
Eldorado Shares") and those shares of Merger Sub Common Stock converted to
shares of Eldorado Common Stock pursuant Section 3.01(a) above) that is
outstanding immediately prior to the Effective Time of the Merger shall be
converted at the Effective Time of the Merger into the right to receive, in
cash, the sum of $23.00 (the "Merger Consideration").
3.02 Immediately after the Effective Time of the Merger and after
surrender to CSBI or such other party designated by CSBI (the "Exchange Agent")
of any certificate which prior to the Effective Time of the Merger shall have
represented any Eldorado Shares, CSBI shall cause to be distributed to the
person in whose name such certificate was issued a check in the amount of the
Merger Consideration to which such person shall have been entitled. Until
surrendered to the Exchange Agent, each certificate which immediately prior to
the Effective Time of the Merger shall have represented any Eldorado Share shall
be deemed at and after the Effective Time of the Merger to represent only the
right to receive, upon surrender, the payment contemplated above.
ARTICLE IV.
General
4.01 This Merger Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
3
66
4.02 Notwithstanding approval of this Merger Agreement by the
shareholders of either of the Constituent Corporations, this Merger Agreement
shall terminate forthwith in the event that the Agreement and Plan of Merger
shall be terminated as therein provided.
4.03 This Merger Agreement may be amended by the parties hereto at any
time before or after approval hereof by the shareholders of the Constituent
Corporations and CSBI, but, after any such approval, no amendment shall be made
which would have a material adverse effect on the shareholders of either of the
Constituent Corporations or CSBI, or change any of the principal terms of the
Merger Agreement, without the further approval of such shareholders. This Merger
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
* * *
4
67
IN WITNESS WHEREOF, the parties have duly executed this Merger
Agreement as of the date first written above.
[MERGER SUB]
By:
------------------------------------
[Xxxxxx X. Xxxxxx, President]
By:
------------------------------------
[Xxxxxxx X. Xxxxx, Secretary]
ELDORADO BANCORP
By:
------------------------------------
Xxxxxxx X. Xxxxxxxx, President
By:
------------------------------------
, Secretary
--------------------
COMMERCE SECURITY BANCORP, INC.
By:
------------------------------------
Xxxxxx X. Xxxxxx, President
By:
------------------------------------
Xxxxxxx X. Xxxxx, Secretary
5
